Company Quick10K Filing
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Equinor Asa
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$20.95 3,331 $69,790
20-F 2018-12-31 Annual: 2018-12-31
20-F 2018-03-23 Annual: 2018-03-23
20-F 2017-03-17 Annual: 2017-03-17
20-F 2016-04-12 Annual: 2016-04-12
20-F 2016-03-18 Annual: 2016-03-18
CTAS Cintas 23,160
KMPR Kemper 5,690
RARE Ultragenyx Pharmaceutical 3,590
RRR Red Rock Resorts 2,950
RMCF Rocky Mountain Chocolate Factory 56
ENDV Endonovo Therapeutics 0
BTCS BTCS 0
IGAP Integrity Applications 0
SUWN Sunwin Stevia 0
DBA Invesco DB Agriculture Fund 0
EQNR 2018-12-31
Item 17 ☐
Item 18 ☐
Item 16 F: Change in Registrant's Certifying Accountant
EX-1 exhibit_1.htm
EX-2 exhibit_2-2.htm
EX-11 exhibit_11.htm
EX-12 exhibit_12-1.htm
EX-12 exhibit_12-2.htm
EX-13 exhibit_13-1.htm
EX-13 exhibit_13-2.htm
EX-15 exhibit_15a-i.htm
EX-15 exhibit_15a-ii.htm
EX-15 exhibit_15a-iii.htm
EX-15 exhibit_15a-iv.htm

Equinor Asa Earnings 2018-12-31

EQNR 20F Annual Report

Balance SheetIncome StatementCash Flow

20-F 1 eqnr_20-f18.htm EQUINOR ANNUAL REPORT ON FORM 20-F  

 

 

 

 

 

 

 

 

2018

Annual Report

on Form 20-F

  

 

 


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 20-F

(Mark One)

    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to

OR

    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

 

Commission file number 1-15200

Equinor ASA

(Exact Name of Registrant as Specified in Its Charter)

N/A

(Translation of Registrant’s Name Into English)

Norway

(Jurisdiction of Incorporation or Organization)

Forusbeen 50, N-4035, Stavanger, Norway

(Address of Principal Executive Offices)

Lars Christian Bacher

Chief Financial Officer

Equinor ASA

Forusbeen 50, N-4035

Stavanger, Norway

Telephone No.: 011-47-5199-0000

Fax No.: 011-47-5199-0050

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Name of Each Exchange On Which Registered

American Depositary Shares

New York Stock Exchange

Ordinary shares, nominal value of NOK 2.50 each

New York Stock Exchange*

 

*Listed, not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:    None 

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:    None 

 

 

Equinor, Annual Report on Form 20-F 2018    1 


 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary shares of NOK 2.50 each

3,328,308,548

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

x Yes    No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 

 Yes   x No

 

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

x Yes    No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)

 

x Yes    No

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   x

Accelerated filer   

Non-accelerated filer   

Emerging growth company   

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  

International Financial Reporting Standards as issued

by the International Accounting Standards Board     x

Other   

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  

Item 18  

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 Yes   x No

 

Table of contents

 

INTRODUCTION

 

About the report

4

Message from the chair of the board

6

Chief executive letter

8

Equinor at a glance

9

Key performance measures

10

 

 

STRATEGIC REPORT

 

2.1 Strategy and market overview

13

2.2 Business overview

19

2.3 Exploration & Production Norway (E&P Norway)

27

2.4 Exploration & Production International (E&P International)

36

2.5 Marketing, Midstream & Processing (MMP)

45

2.6 Other group

49

2.7 Corporate

55

2.8 Operational performance

64

2.9 Financial review

81

2.10 Liquidity and capital resources

94

2.11 Risk review

99

2.12 Safety, security and sustainability

110

2.13 Our people

116

 

 

3. CORPORATE GOVERNANCE

120

3.1 Introduction

121

3.2 General meeting of shareholders

124

3.3 Nomination committee

125

3.4 Corporate assembly

126

3.5 Board of directors

129

3.6 Management

138

3.7 Compensation to governing bodies

145

3.8 Share ownership

153

3.9 External auditor

155

3.10 Risk management and internal control

157

 

 

FINANCIAL STATEMENTS AND SUPPLEMENTS

 

4.1 Consolidated financial statements of the Equinor group

160

4.2 Supplementary oil and gas information (unaudited)

232

 

 

ADDITIONAL INFORMATION

 

5.1 Shareholder information

246

5.2 Use and reconciliation of non-GAAP financial measures

254

5.3 Legal proceedings

259

5.6 Terms and abbreviations

260

5.7 Forward-looking statements

263

5.8 Signature page

264

5.9 Exhibits

265

5.10 Cross reference to Form 20-F

266

 

2   Equinor, Annual Report on Form 20-F 2018     


 

 

Equinor, Annual Report on Form 20-F 2018    3 


 

About the report

 

This document constitutes the Annual report on Form 20-F in accordance with the US Securities Exchange Act of 1934 applicable to foreign private issuers, for Equinor ASA for the year ended 31 December 2018. A cross reference to the Form 20-F requirements are set out in section 5.10 in this report. The Annual report on Form 20-F and other related documents are filed with the US Securities and Exchange Commission (the SEC). The Annual report and Form 20-F are filed with the Norwegian Register of company accounts.

 

The Equinor annual report and Form 20-F may be downloaded from Equinor’s website at www.equinor.com/reports. References to this document or other documents on Equinor’s website are included as an aid to their location and are not incorporated by reference into this document. All SEC filings made available electronically by Equinor may be found at www.sec.gov.

 

 

4   Equinor, Annual Report on Form 20-F 2018     


 

 

The most significant transition our modern-day energy systems have ever seen is underway, and we aim to be at the forefront of this development.”

Jon Erik Reinhardsen

 

Equinor, Annual Report on Form 20-F 2018    5 


 

Message from the chair of the board

Dear fellow investor,

 

On 15 March 2018 the board of directors of Statoil proposed to change the name of the company to Equinor. The change was approved by the annual general meeting on 15 May, and from 16 May, the company name is Equinor. The rationale behind the new name was clear: as the world is changing, so is the company. The most significant transition our modern-day energy systems have ever seen is underway, and we aim to be at the forefront of this development. The name Equinor reflects the company’s strategy and development towards becoming a broad energy company.

 

Strong safety performance is essential to Equinor’s licence to operate. The serious incident frequency for 2018 improved compared to 2017. World-leading safety standards must be a hallmark for Equinor. The board is therefore working closely with the administration to ensure that forceful safety efforts and continued leadership focus are maintained. Safety results must be delivered every day.

 

Operationally and financially, 2018 was a good year for Equinor. In 2018 we delivered free cash flow[1]  of USD 3.1 billion. Equinor continues to be cash-flow positive below USD 50 per barrel. At the same time, we have strengthened our balance sheet by reducing the net debt ratio1.

 

Equinor remains committed to competitive capital distribution. For the fourth quarter 2018 we proposed to the annual general meeting a quarterly dividend of USD 0.26 per share, an increase of 13%. This is based on the sustainable improvements we have generated over recent years. The proposed increase in the dividend is in accordance with the dividend policy to grow the annual cash dividend in line with long term underlying earnings.

 

Equinor has increased production and delivered a record high reserve replacement ratio during 2018. The reserves-to-production ratio is now almost nine years. Excluding the annual production effect, the company added new barrels to its resource base and Equinor is well positioned for future resource growth. Last year the company acquired and won attractive exploration licences in Norway, the UK, Canada, Brazil and the Gulf of Mexico. We expect to spend around USD 1.7 billion on exploration in 2019.

Equinor is developing a distinct and competitive portfolio. The company will leverage its industrial strengths of operational excellence, world-class recovery, leading project delivery, premium market access and digital leadership to develop long-term value on the NCS, develop new growth options internationally and increase value creation in the marketing and midstream business.

 

Preparing Equinor for a low-carbon future is an integrated part of the strategy. Concrete actions to reduce greenhouse gas emissions in the company’s operations have been implemented, and further steps are being taken to build an even more carbon-resilient portfolio.

 

Equinor continues to build a material industrial position in new energy solutions. Equinor is now maturing further offshore wind opportunities in the North Sea, the Baltic Sea and the east coast of the US. Entering solar projects in Brazil and Argentina as well as acquiring a 10% share in Scatec Solar ASA, were milestone events. Furthermore, acquiring Danske Commodities, one of Europe’s largest short-term electricity traders, opens new opportunities and enables us to be part of a larger value chain in energy from renewable sources.

 

We have seen a gradual rebalancing of the oil market and recovering prices. However, markets have been volatile, and we should be prepared for more volatility in the coming years. Key influencing factors are geopolitical developments, OPEC policies, the US shale response and the price impact of short-term trading activities. For the board of directors, it is essential that Equinor is a robust and resilient company, well equipped for different scenarios. The board of directors believes the company is well prepared to deal with future market situations, and has the competence, capacity and leadership capabilities necessary to create new business opportunities and long-term value for our shareholders.

 

I would like to thank all employees for their dedication and commitment to Equinor and our shareholders for their continued investment.

 

 

Jon Erik Reinhardsen

Chair of the board

 

  

 

[1] See section 5.2 Use and reconciliation of non-GAAP financial measures

6   Equinor, Annual Report on Form 20-F 2018     


 

 

We have strengthened our competitiveness, improved our project portfolio and have a clear strategy for further development of our company. We have positioned ourselves for long-term shareholder value creation and to be competitive in a low-carbon future.”

 

Eldar Sætre

 

 

 

Equinor, Annual Report on Form 20-F 2018    7 


 

Chief executive letter

Dear fellow shareholder,

 

Last year was one for the history books. We became Equinor after almost 50 years as Statoil. Our name change reflects the global energy transition and our development as a broad energy company. “Equi” is the starting point for words like equal, equality and equilibrium. “Nor” signals a company that is proud of its Norwegian origins. Equinor is a powerful expression of who we are, where we come from and what we aspire to be for the next 50 years and beyond.

 

The safety of our people and integrity of our operations remains our top priority. We have continued to improve our safety performance, and our serious incident frequency was 0.5 last year, down from 0.6 in 2017. But we will strive to do even better. We have therefore initiated a series of safety initiatives at all levels and parts of the company, with the “Safety beyond 2020” project as the main corporate initiative.

 

We delivered solid results for 2018, with adjusted earnings1 of USD 18 billion before tax and USD 6.7 billion after tax. Our net operating income was USD 20.1 billion, and net income was USD 7.5 billion. We also reduced our debt ratio from 29% to 22.2%1. Last year we said that, at an average oil price of USD 70 (real), we would grow our return on average capital employed to around 10% in 2018 and 12% in 2020. We delivered 12% already in 2018. At an average Brent oil price of USD 71 per barrel, we generated USD 6.3 billion in organic free cash flow [2] . Our free net cashflow in 2018 was USD 3.1 billion. Organic capital expenditure was at USD 9.9 billion1, below the USD 11 billion initially guided. Last year we paid USD 9 billion in taxes.

 

During the downturn we improved our project portfolio significantly. We sanctioned seven new projects in 2018, which are expected to deliver significant volumes to Equinor at an average break-even price of USD 14. We produced an all-time high 2.111 million barrels of oil equivalent per day in 2018, Sanctioning of projects, combined with improvements of existing fields, also enabled us to deliver our strongest-ever reserve replacement ratio of 213% and, excluding sales and acquisition of assets, organic reserve replacement ratio of 189%. Between 2019 and 2025, we expect around 3% average annual production growth. Our portfolio of projects expected to come on stream by 2025 has a break-even price of around USD 30 per barrel, indicating continued strong cash generation and high returns.

 

In 2018 we also took new steps to become even more competitive in a low-carbon world. Equinor-operated projects sanctioned last year have average CO2 emissions below one kg per barrel on an 100% basis, which is more than 90% lower than the global average. Equinor is already a leading company when it comes to CO2-efficient production of oil and gas, with average emissions of around 9 kg per barrel. In a recent benchmarking by the CDP, Equinor was ranked first among our peers for our readiness for the low-carbon transition. We see this as a competitive advantage that will become increasingly important.

 

Equinor is developing as a broad energy company, and we are gradually building a profitable portfolio within renewable energy. The renewable projects we have invested in today have a capacity of around 1.3 gigawatts. Renewables have opened a new set of opportunities for value creation for our company, while also diversifying our portfolio, making it more resilient, both strategically as well as financially.

 

Climate change is happening, energy markets are changing, and we know that the world needs a comprehensive transition of our energy systems. These facts are integrated into our strategies.

 

We are in a strong position today. We have strengthened our competitiveness, improved our project portfolio and have a clear strategy for further development of our company. We have positioned ourselves for long-term shareholder value creation and to be competitive in a low-carbon future. Our results confirm that we are on track with our ambitions to increase returns, grow production and bring cash flow to high levels in the years to come.

 

 

Eldar Sætre

President and CEO

Equinor ASA

 

 

  

 

[2] See section 5.2 Use and reconciliation of non-GAAP financial measures

8   Equinor, Annual Report on Form 20-F 2018     


 

Equinor, Annual Report on Form 20-F 2018    9 


 

  

10   Equinor, Annual Report on Form 20-F 2018     


 

 

 

Equinor, Annual Report on Form 20-F 2018    11 


 

 

 

 


  

12   Equinor, Annual Report on Form 20-F 2018     


 

2.1

Strategy and market overview

 

  

A picture containing building, athletic game, sport, fence

Description generated with very high confidence

Gina Krog, NCS

  

Equinor’s business environment

Market overview

While the global economy grew largely above the historical trend in 2017, last year turned out more modest, driven by trade frictions and uneven performance in emerging markets. Estimated economic growth for 2018 by the OECD1 was 3.6%.

 

The US achieved a significant growth rate above historical average at 2.9% for 2018, owing to the effects of tax cuts, increased fiscal spending and accommodative monetary policies. Eurozone growth showed weakness through 2018, achieving an expected growth rate of a modest 1.8%, with the German economy close to recession and Italy contracting in the fourth quarter of 2018.

 

Due to prolonged uncertainty around Brexit, the UK realised an annualised growth rate of 0.8% in the fourth quarter of 2018. The full-year 2018 GDP growth projection is revised down to 1.4%.

 

The Chinese GDP growth rate abated from the 6.8% experienced in 2017 to 6.6% as domestic consumption weakened and uncertainty concerning trade issues took its toll. In line with the global trend, Japanese economic growth came off from 2017 to an expected annual GDP growth of a meagre 0.7% for 2018 as energy costs rose, and exports slowed.

 

India, on the other hand, is expected to deliver a GDP growth rate of 7.2% for 2018, benefitting from structural reforms implemented in 2017.

Following the presidential election in 2018 and consistent economic growth since the 2015-2016 recession, Brazil showed positive signs through 2018. In contrast, Russia developed less favourably due to a mix of fiscal and monetary policy decisions.

 

Looking ahead, it appears that the global economic expansion has lost momentum as uncertainty now poses a dominant theme. Trade tensions between the US and China as well as the monetary policy of key central banks and the development in key emerging economies will be important for the unfolding of the world economy in 2019.

 

 

                                                                               .

1 All GDP numbers based on OECD information

Equinor, Annual Report on Form 20-F 2018    13 


 

 

 

Oil prices and refining margins

2018 was characterised by high volatility both in crude prices and refinery margins. The average price for Dated Brent was 71.1 USD/bbl, 31% higher than the 54.2 USD/bbl average in 2017.

Oil prices opened 2018 at USD 66 USD/bbl, the strongest start to a calendar year since 2014. Because of decisions by the Organization of the Petroleum Exporting Counties (OPEC) and their non-OPEC allies to extend the production cut agreement in 2018, storage levels were significantly reduced, reaching the target 5-year average benchmark before the summer. Despite elevated oil price levels incentivising a rapid surge in US production, unplanned additional declines in supply from Venezuela, Mexico and Angola resulted in a tighter market during the first quarter, with prices rising steadily until May.

In June, OPEC and non-OPEC allies, concerned by tight market conditions and the forthcoming disruptions to Iran’s supply due to US sanctions, decided to collectively ramp up production to offset any potential losses and maintain prices on a healthy level. Prices remained relatively steady around 74 USD/bbl throughout the summer, but already in September another price rally started on fears that production might not be sufficient to offset supply losses from Iran when sanctions were to take effect in November. Brent peaked at USD 86.1 per barrel in October.

During November the market sentiment started shifting from fears of undersupply and low spare capacity towards the potential disruptive effect on demand from the trade disputes between the US and China and the effect of high oil prices. This, coupled with the unexpected softening of Iranian sanctions and record US production, led to serious worries about oversupply. Faced again with potential oversupply, OPEC and non-OPEC allies decided at the December meeting in Vienna to reintroduce a production cut agreement starting January 2019. By the end of the year, prices had dropped by more than 40% since the peak in October, closing the year at USD 50.2 per barrel on 28th December 2018. In essence, the new year started in the same fashion as in 2018 – albeit with significantly lower stock levels this second round.

Refining margins
Refinery margins in Europe in 2018 were weaker than in 2017, and volatile throughout the year. Demand in Europe was strong, with a normal seasonal summer peak. Diesel demand was the strongest ever, and gasoline demand the highest since 2012. In the US the peak demand occurred during the summer months, with the strongest refinery margin in August. Overall, the gasoline prices averaged USD 2.72 per gallon in 2018, 13% higher than in 2017. Between May and November, prices were affected negatively by low water

 

14   Equinor, Annual Report on Form 20-F 2018     


 

levels on the Rhine, restricting normal barge traffic in and out of the Rotterdam pricing hub. This also restricted supply of naphtha to inland petrochemical plants. From September, margins for gasoline and naphtha collapsed. The wholesale gasoline prices in the US dropped about 20%. Export opportunities into the US fell due to high stock levels there. Import requirements into Asia fell on higher local supply and weak demand due to concerns over the effect of the US - China trade conflict. Diesel and fuel oil margins rose to compensate, though. Through most of the year, margins were supported by weak physical crude vs. the paper market at the International Currency Exchange (ICE).

 

Natural gas prices

Gas prices – Europe

The National Balancing Point (NBP) fell in the beginning of 2018 from the December 2017 monthly average of 7.8 USD/MMBtu due to abnormally warm and windy weather and nuclear plants returning to full capacity. During a significant cold period in March, NBP day-ahead rocketed to 15 USD/MMBtu before settling down to pre-event levels of 7 USD/MMBtu. In the second and third quarter of 2018 the supply/demand balance was tight and there was a consistent growth in European gas prices, and the NBP monthly average in September was 9.6 USD/MMBtu. This was caused by an overall rallying energy complex (oil, CO2, coal and Asian LNG prices), call for gas to fill storage, strong Asian demand drawing LNG out of Europe, high level of maintenance and the extraordinarily warm summer in Northwest Europe. The fourth quarter of 2018 continued with warmer than normal seasonal weather, reducing gas demand. There was also an influx of LNG spot cargoes arriving in Europe rather than Asia as shipping rates were high. In addition, the storage inventory levels were comfortable, thus putting downward pressure on prices. Average annual price in 2018 was 8.0 USD/MMBtu compared to 5.8 USD/MMBtu in 2017.  

 

Gas prices – North America

The Henry Hub price remained quite stable throughout 2018, averaging 3.15 USD/MMBtu for the year, 6% higher than in 2017. Dry gas production set record highs in 2018, but storage levels ended the year 17% below the five-year average as strong demand and a lack of price incentive depressed storage build during injection season. Winter periods continued to drive upside price risks. In November, prices reached 7 USD/MMBtu levels that had not been seen since the winter of 2014.

 

Global LNG prices

The Asian LNG average price for December 2017 was 10.6 USD/MMBtu, while the average price for 2017 was 7.1 USD/MMBtu. 2018 started with a tight LNG market and comparatively high prices due to strong Asian demand. From here, monthly prices fell throughout first quarter until April. With warm summer weather driving gas demand for cooling and planned maintenance, prices increased to 10.4 USD/MMBtu over the summer. September saw continued strong LNG demand with average price of 11.5 USD/MMBtu, before the market started softening with ramp up of new LNG supplies, fall in crude prices and a comparatively mild start of winter in Asia. At the end of the year, the Asian LNG price dropped below 9 USD/MMBtu, well below the average price for 2018 of 9.7 USD/MMBtu.

 

Equinor’s corporate strategy

Equinor is an international energy company committed to long-term value creation in a low carbon future inspired by its vision of shaping the future of energy.

 

Equinor continues to pursue its strategy of always safe, high value and low carbon through developing and maximising the value of its unique Norwegian continental shelf position, its international oil and gas business, its manufacturing and trading activities and its growing new energy business.

 

The energy context is expected to remain volatile characterised by geopolitical shifts, challenges in liquids resource replenishments, market cyclicality, structural changes to costs and increasing momentum towards low carbon. The company expects volatility in prices both upwards and downwards. Equinor’s strategic response is focused on creating value by building a more resilient, diverse and option-rich portfolio, delivered by an empowered organisation. To do so, Equinor will continue to concentrate its strategy realisation and development around the following areas:   

 

·           Norwegian continental shelf – transforming the NCS for continued high value creation and low carbon emissions for the coming decades

·           International oil and gas – deepen core areas and develop growth options  

·           New energy solutions – create a material new industrial position  

·           Midstream and marketing – secure premium market access and grow value creation through cycles 

Equinor’s unique position at the Norwegian continental shelf has enabled the company to develop new technologies and scale them industrially. Equinor has today a strong set of industrial value drivers:

Equinor, Annual Report on Form 20-F 2018    15 


 

 

·           Operational excellence

·           World-class recovery

·           Leading project deliveries

·           Premium market access

·           Digital leadership

In sum, these drivers strengthen the company’s competitiveness. Internationally, Equinor is increasingly taking the role as operator, allowing the company to leverage its industrial value drivers even more. Across its business, Equinor is targeting opportunities that play to its strength.

  

 

   
 

Melkøya in Hammerfest, Norway

 

  

Equinor is actively shaping its future portfolio guided by the following strategic principles:

 

·           Cash generation capacity – generating positive cash flows from operations, even at low oil and gas prices, in order to sustain dividend and investment capacity through the economic cycles

·           Capex flexibility – having sufficient flexibility in organic capital expenditure to be able to respond to market downturns and avoid value destructive measures as well as ability to always prioritise

·           Capture value from cycles – ensuring the ability and capacity to act counter-cyclically to capture value through the cycles

·           Low-carbon advantage – maintaining competitive advantage as a leading company in carbon-efficient oil and gas production, while building a low-carbon business to capture new opportunities in the energy transition

To deliver on the strategy, Equinor has identified four key strategic enablers that will continue to support the business’s needs:

 

·           Safe and secure operations: Safety and security is Equinor’s top priority. In 2018, measures to reinforce safety in all areas including continued collaboration with partners and suppliers, were initiated. The corporate wide activities focus on safety (I am safety), security (2020 Security roadmap), and IT security (New information technology strategy). In 2018, Equinor achieved an all-time low serious incident frequency.

·           Technology and innovation: Equinor's technology strategy provides long-term guidance for technology development and implementation. In 2018, Equinor continued delivering on its digital roadmap. A key activity is building a cloud-based data platform designed to make data available anytime, anywhere. Safeguarding the company from cyber threats remains a key focus area for the company. In 2018, integrated operation centers were opened in Austin and Bergen as well as the Geo operations centre and automated drilling control is increasingly being used to reduce drilling cost.

16   Equinor, Annual Report on Form 20-F 2018     


 

·           Empowered people: Equinor promotes a culture of collaboration, innovation and safety, guided by its values. A diverse and inclusive Equinor continues to develop its employees and attract talents to deliver on the future-fit portfolio ambition.

·           Stakeholder engagement: Equinor engages with stakeholders to secure industrial legitimacy, its social contract, trust and strategic support from stakeholders. This engagement extends to internal and external collaboration, partnerships, and other co-operation with suppliers, partners, governments, NGOs and communities in which Equinor operates.

Equinor maintains its advantage as a leading company in carbon- efficient oil and gas production while building a low-carbon business to capture new opportunities in the energy transition. The company believes a lower carbon footprint will make it more competitive in the future and climate-related principles are embedded in the corporate strategy and performance and risk management. Further information can be found in section 2.12 Safety, security and sustainability.

Norwegian continental shelf – Transforming the NCS for continued high value creation and low carbon emissions for the coming decades

For more than 40 years, Equinor has explored, developed and produced oil and gas from the NCS. It represents approximately 60% of Equinor’s equity production at 1,288 mboe per day in 2018. Equinor aims to deepen and prolong its position by accessing and maturing opportunities into valuable production. At the same time, Equinor aims to continue to improve the efficiency, reliability, carbon emissions and lifespan of fields already in production. Strong volume growth is expected towards historically high production levels in 2025, representing significant value creation.

Equinor believes that the NCS holds substantial future potential and demonstrates its strategic commitment to the NCS through new development projects, new ways of working and asset optimisation, and continued exploration efforts for near infrastructure explorations as well as testing new plays. An extensive project portfolio holds large field developments, life-time extensions, subsea tie-back projects, and CO2-reducing measures. In the next few years, Equinor will bring several large projects on stream including Johan Sverdrup, Martin Linge, and Johan Castberg.  

More information on assets in operations and projects under development is provided in section 2.3 E&P Norway – Exploration & Production Norway.

 

International oil and gas – Deepen core areas and develop growth options

Equinor has been growing its international portfolio for over 25 years. International oil and gas production represented approximately 40% of Equinor’s equity production at 823 mboe per day in 2018, a record-high year for production. During the year Equinor acquired and won attractive exploration licences in Brazil, Canada, the UK and the Gulf of Mexico to strengthen the exploration portfolio further.

 

As Equinor deepens in its international core areas in Brazil and the US, it will also develop future growth options across a broad portfolio. The share of operated equity production is expected to double over the next few years, allowing Equinor to add even more value as an operator. Equinor is drawing on more than 40 years of experience from the NCS in the future development of Bay du Nord and Rosebank. Other major assets in Equinor’s project portfolio include Mariner, Vito, Peregrino phase 2, Carcará, BM-C-33, North Komsomolskoye, North Platte and Block 17 satellites in Angola.

 

As well as pursuing growth options, Equinor is focused on continuing to deliver on cost improvements across its international portfolio, reducing carbon emissions and implementing digital solutions to maximise value.

 

In the United States, Equinor continued to focus on increasing and sustaining the profitability of existing assets in the portfolio, achieving a portfolio net operating income break-even below the target of USD 50 per barrel and contributing substantial positive cash flow. In Brazil, Equinor is sustaining and growing a competitive portfolio of high-quality assets in all development phases, including a strong exploration portfolio.

 

More information on assets in operations and projects under development internationally is provided in section 2.4 E&P International – Exploration & Production International.

 

New energy solutions – Create a material new industrial position

Equinor continues to explore new business opportunities in offshore wind, solar, hydrogen and carbon capture and storage (CCS). Equinor is building a new energy portfolio and expects 15-20% of its investments to be directed towards new energy solutions by 2030.

The development of the Arkona offshore wind farm (operated by E.ON) is progressing and is expected to be in full operation in 2019. Equinor has also acquired three early phase offshore wind projects in Poland during 2018: MFW Bałtyk I, II and III. In the US, Equinor continues to mature the New York Wind energy area and will bid for offtake contracts both in New York and New Jersey. In 2018, Equinor acquired one of three offshore wind leases offered outside Massachusetts and a minority stake in Scatec Solar.

Equinor is operating three offshore windfarms in the UK: Sheringham Shoal, Dudgeon and Hywind Scotland. The Apodi solar plant in Brazil (operated by Scatec Solar) started commercial operations in November 2018. In 2018, Equinor Energy Ventures continued its investments in potential high-impact technologies supporting the company’s strategy of growth in new energy solutions. 

More information on new energy assets in operation and projects under development is provided in section 2.6 Other group.

Equinor, Annual Report on Form 20-F 2018    17 


 

Midstream and marketing – Secure premium market access and grow value creation through cycles

The main objective for Equinor’s Midstream, Marketing & Processing unit’s (MMP) mid- and downstream activities is to process and transport its oil and gas production (including the Norwegian State’s petroleum) competitively to premium markets, securing maximum value realisation. In addition, MMP is expanding its marketing of a small, but growing electricity portfolio. Focus in 2018 has been on:

·           Safe, secure and efficient operations

·           Securing flow assurance and premium market access for Equinor’s equity production and the Norwegian State’s direct financial interest volumes

·           Building and maintaining resilience through asset backed trading, value chain positioning and counter-cyclical actions

·           Reducing carbon emissions and intensity

·           Focus on regional piped gas value chains and pursue selective trading positions in liquefied natural gas (LNG)

In 2018, Equinor announced the acquisition of Danske Commodities and closed the transaction in the beginning of 2019. This is strengthening the company’s ability to capture value from its current and future equity production of renewable energy and supports Equinor’s aim to grow in new energy solutions. Equinor has continued to take positions to strengthen its asset backed trading business and focused on renewing its contracted shipping portfolio. More information on mid- and downstream activities is provided in section 2.5 MMP – Marketing, Midstream & Processing.

 

Group outlook

Equinor’s plans address the current business environment while continuing to invest in high-quality projects. Equinor continues to reiterate its efforts and commitment to deliver on its strategy.

·           Organic capital expenditures1 for 2019 are estimated at around USD 11 billion

·           Equinor intends to continue to mature its large portfolio of exploration assets and estimates a total exploration activity level of around USD 1.7 billion for 2019, excluding signature bonuses

·           Equinor’s ambition is to keep the unit of production cost in the top quartile of its peer group

·           For the period 2019 – 2025, production growth2 is expected to come from new projects resulting in around 3% CAGR (Compound annual growth rate)

·           Production for 2019 is estimated to be around the 2018 level

·           Scheduled maintenance activity is estimated to reduce quarterly production by approximately 15 mboe per day in the first quarter of 2019. In total, maintenance is estimated to reduce equity production by around 40 mboe per day for the full year of 2019

 

These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Deferral of production to create future value, gas off-take, timing of new capacity coming on stream, operational regularity, activity level in the US onshore, as well as uncertainty around the closing of the announced transactions represent the most significant risks related to the foregoing production guidance. For further information, see section 5.7 Forward-looking statements.

 

 

1 See section 5.2 for non-GAAP measures.

2 The production guidance reflects our estimates of proved reserves calculated in accordance with US Securities and Exchange Commission (SEC) guidelines and additional production from other reserves not included in proved reserves estimates. The growth percentage is based on historical production numbers, adjusted for portfolio measures.

 

18   Equinor, Annual Report on Form 20-F 2018     


 

2.2

Business overview

 

  

History in brief

 

Equinor has grown along with the emergence of the Norwegian oil and gas industry, dating back to the late 1960s. Today, Equinor are evolving into a broad energy company, with a significant and growing renewables business.

 

On 18 September 1972, Equinor, formerly Statoil, was formed by a decision of the Norwegian parliament and incorporated as a limited liability company under the name Den norske stats oljeselskap AS. Owned 100% by the Norwegian State, Equinor's initial role was to be the government's commercial instrument in the development of the oil and gas industry in Norway. Growing in parallel with the Norwegian oil and gas industry, Equinor’s operations were primarily focused on exploration, development and production of oil and gas on the Norwegian continental shelf (NCS).

 

Two years later the Statfjord field was discovered in the North Sea. In 1979, the Statfjord field commenced production, and in 1981 Equinor was the first Norwegian company to be given operatorship for a field, at Gullfaks in the North Sea.

 

During the 1980s and 1990s, Equinor grew substantially through the development of the NCS (Statfjord, Gullfaks, Oseberg, Troll and others). Equinor also became a major player in the European gas market by entering into large sales contracts for the development and operation of gas transport systems and terminals. During the same decade, Equinor was involved in manufacturing and marketing in Scandinavia and established a comprehensive network of service stations. This line of business was fully divested in 2012.

 

In 2001, Equinor was listed on the Oslo and New York stock exchanges and became a public limited company under the name Statoil ASA, now Equinor ASA, 67% majority owned by the Norwegian State. Equinor’s ability to fully realise the potential of the NCS and grow internationally was strengthened through the merger with Hydro's oil and gas division on 1 October 2007.

 

Equinor’s business has grown as a result of substantial investments on the NCS and internationally. Equinor has delivered the world’s longest multiphase pipelines on the Ormen Lange and Snøhvit gas fields, and the giant Ormen Lange development project was completed in 2007. Equinor has also expanded into Algeria, Angola, Azerbaijan, Brazil, Nigeria, UK, the US Gulf of Mexico, among others. The US onshore operations are the largest international production outside Norway, and with the Peregrino field, we are the largest international operator in Brazil.

 

In addition, our access to crude oil in the form of equity, governmental and third-party volumes make Equinor a large seller of crude oil, and Equinor is the second-largest supplier of natural gas to the European market. Processing, refining, offshore wind and carbon capture and storage are also part of our operations.

 

In recent years, Equinor has utilised its expertise to design and manage operations in various environments to grow upstream activities outside the traditional area of offshore production. This includes the development of shale oil and gas projects. 

 

As part of Equinor’s strategy, the company is investing actively in new energy, such as offshore wind, and solar energy, in order to expand energy production, strengthen energy security and combat climate change.

 

In 2018, Statoil ASA changed its name to Equinor ASA following approval of the name change by the company’s annual general meeting on 15 May 2018. The new name supports the company’s strategy and development as a broad energy company in addition to reflecting Equinor’s evolution and identity as a company for the generations to come.

 

Equinor, Annual Report on Form 20-F 2018    19 


 

Equinor is among the world’s largest offshore operators, the second-largest gas exporter to Europe, and a growing force in renewables. Equinor is the world leader in carbon capture, storage and carbon efficiency in oil and gas production. While seeking to satisfy growing energy demand, Equinor recognises the need to minimise impact on the environment.

 

Equinor operates in more than 30 countries and employs 20,525 people worldwide.

 

Equinor’s registered office is at Forusbeen 50, 4035 Stavanger, Norway. The telephone number of its registered office is +47 51 99 00 00.

 

Equinor’s competitive position

Key factors affecting competition in the oil and gas industry are oil and gas supply and demand, exploration and production costs, global production levels, alternative fuels, and environmental and governmental regulations. When acquiring assets and licences for exploration, development and production and in refining, marketing and trading of crude oil, natural gas and related products, Equinor competes with other integrated oil and gas companies.

 

Equinor continues to explore new business opportunities in offshore wind, solar, hydrogen and carbon capture and storage (CCS). Improvements in cost and technology for renewables have rapidly changed the landscape. Equinor competes with other companies within the renewable business.

Equinor's ability to remain competitive will depend, among other things, on continuous focus on reducing costs and improving efficiency. It will also depend on technological innovation to maintain long-term growth in reserves and production, the ability to seize opportunities in new areas and utilise new opportunities for digitalisation.

 

The information about Equinor's competitive position in the strategic report is based on a number of sources; e.g. investment analyst reports, independent market studies, and internal assessments of market share based on publicly available information about the financial results and performance of market players.

  

Corporate structure

Equinor is a broad international energy company, its value chain includes all phases from exploration of hydrocarbons through developing, production and manufacturing marketing and trading, while growing the renewables business. Equinor consists of eight business areas, staffs and support divisions.

 

   
 

Equinor’s value chain

 

  

Equinor’s operations are managed through eight business areas: Development & Production Norway (DPN), Development & Production International (DPI), Development & Production Brazil (DPB), Marketing, Midstream & Processing (MMP), New Energy Solutions (NES), Technology, Projects & Drilling (TPD), Exploration (EXP) and Global Strategy & Business Development (GSB). With

20   Equinor, Annual Report on Form 20-F 2018     


 

effect from the third quarter 2018, DPB is a new business area, and former Development & Production USA (DPUSA) is included in DPI.

 

On 28 April 2018, Equinor announced changes of its business area structure to strengthen its ability to deliver on Equinor’s always safe, high value and low carbon strategy as it develops as a broad energy company. Brazil was established as a separate business area representing a new core area, holding promising offshore oil and gas basins with a significant resource base. Equinor’s US operations were integrated in DPI as US operations have been maturing over the last few years. Equinor is pursuing unconventional onshore business opportunities globally and sees synergies in having US onshore operations which are organised within DPI.

 

Development & Production Norway (DPN)

Managing Equinor’s upstream activities on the NCS, DPN explores for and extracts crude oil, natural gas and natural gas liquids in the North Sea, the Norwegian Sea and the Barents Sea. DPN aims to ensure safe and efficient operations and transform the NCS to deliver sustainable value for many decades. DPN is shaping the future of the NCS with a digital transformation and solutions to achieve a lower carbon footprint and high recovery rates.

 

Development & Production International (DPI)

DPI manages Equinor’s worldwide upstream activities in all countries outside Norway and Brazil. DPI operates across six continents covering offshore and onshore exploration and extraction of crude oil, natural gas and natural gas liquids; and implementing rigorous safety standards, technological innovations and environmental awareness. DPI's intent is to build and grow a competitive international portfolio - always safe, high value and low carbon.

 

Development & Production Brazil (DPB)

DPB manages the development and production of oil and gas resources in Brazil, which has been defined as a core area for long-term growth. Equinor has a diverse portfolio with activities in all development stages from exploration to production. Most of Brazil licences are in deep-water areas, some of them more than 2,900 metres deep. Equinor has been producing in Brazil since 2011 with the Peregrino field, in the Campos Basin. DPB's intent is to grow a competitive portfolio creating value by increasing capacity and increasing recovery from mature fields; reducing emissions and safety as priority.

 

Marketing, Midstream & Processing (MMP)

MMP works to maximise the value creation in Equinor’s global mid- and downstream positions. MMP is responsible for global marketing and trading of crude, petroleum products, natural gas and electricity, including marketing of the Norwegian State’s natural gas and crude on the Norwegian continental shelf. MMP is also responsible for onshore plants, transportation and for the development of value chains to ensure flow assurance for Equinor’s upstream production and to maximise value creation.

 

Technology, Projects & Drilling (TPD)

TPD is responsible for field development, well deliveries, technology development and procurement in Equinor. TPD delivers safe, secure and efficient field development, including well construction, founded on world-class project execution and technology excellence. TPD utilises innovative technologies, digital solutions and carbon-efficient concepts to shape a competitive project portfolio at the forefront of the energy industry transformation. Sustainable value is being created together with suppliers through a simplified and standardised fit-for-purpose approach.

 

Exploration (EXP)

EXP manages Equinor’s worldwide exploration activities with the aim of positioning Equinor as one of the leading global exploration companies. This is achieved through accessing high potential new acreage in priority basins, globally prioritising and drilling more significant wells in growth and frontier basins, delivering near-field exploration on the NCS and other select areas, and achieving step-change improvements in performance.

 

New Energy Solutions (NES)

NES reflects Equinor’s long-term goal to complement Equinor’s oil and gas portfolio with profitable renewable energy and other low-carbon energy solutions. NES is responsible for wind farms and carbon capture and storage as well as other renewable energy and low-carbon energy solutions. NES aims to do this by combining Equinor’s oil and gas competence, project delivery capacities and ability to integrate technological solutions.

 

Global Strategy & Business Development (GSB)

GSB develops the corporate strategy and manages business development and merger and acquisition activities for Equinor. The ambition of the GSB business area is to closely link corporate strategy, business development and merger and acquisition activities to actively drive Equinor's corporate development.

 

  

Equinor, Annual Report on Form 20-F 2018    21 


 




Segment reporting

The business areas DPI and DPB are aggregated into the reporting segment Exploration & Production International (E&P International). The aggregation has its basis in similar economic characteristics, such as the assets’ long term and capital-intensive nature and exposure to volatile oil and gas commodity prices, the nature of products, service and production processes, the type and class of customers, the methods of distribution and regulatory environment. The reporting segments Exploration & Production Norway (E&P Norway) and MMP consists of the business areas DPN and MMP respectively. The business areas NES, GSB, TPD, EXP and corporate staffs and support functions are aggregated into the reporting segment “Other” due to the immateriality of these areas.  The changes in the business area structure had no effect on the reporting segments.

 

Most of costs within the business areas GSB, TPD and EXP are allocated to the E&P International, E&P Norway and MMP reporting segments. Activities relating to the EXP business area are fully allocated to the relevant exploration and production reporting segments. Activities relating to the TPD, GSB business areas and corporate staffs and support functions are partly allocated to the relevant exploration and production and MMP reporting segments.

 

Internal transactions in oil and gas volumes occur between reporting segments before being sold in the market. The pricing policy for internal transfers is based on estimated market prices. For further information, see section 2.8 Operational performance under Production volumes and prices.

 

Equinor eliminates intercompany sales when combining the results of reporting segments. Intercompany sales include transactions recorded in connection with oil and natural gas production in the E&P Norway and the E&P International reporting segments, and in connection with the sale, transportation or refining of oil and natural gas production in the MMP reporting segment. Certain types of transportation costs are reported in both the MMP and the E&P International segments.

 

The E&P Norway segment produces oil and natural gas which is sold internally to the MMP segment. A large share of the oil produced by the E&P International segment is also sold through the MMP segment. The remaining oil and gas from the E&P International segment is sold directly in the market. For intercompany sales and purchases, Equinor has established a market-based transfer pricing methodology for the oil and natural gas that meets the requirements for applicable laws and regulations.

 

In 2018, the average transfer price for natural gas was USD 5.65 per mmbtu. The average transfer price was USD 4.33 per mmbtu in 2017 and USD 3.42 in 2016. For the oil sold from the E&P Norway segment to the MMP segment, the transfer price is the applicable market-reflective price minus a cost recovery rate.

 

 

 

 

 

22   Equinor, Annual Report on Form 20-F 2018     


 

The following table shows certain financial information for the four reporting segments, including intercompany eliminations for each of the years in the three-year period ending 31 December 2018.

 

For additional information, see note 3 Segments to the Consolidated financial statements.

Presentation

In the following sections of this report, the description of the operations and financial review are discussed following the reporting segments presentation.

 

As required by the SEC, Equinor prepares its disclosures about oil and gas reserves and certain other supplementary oil and gas disclosures based on geographic areas. Equinor’s geographical areas are defined by country and continent and consist of Norway, Eurasia excluding Norway, Africa, US and Americas excluding US.

 

Segment performance

 

 

 

 

 

 

 

 

 

  For the year ended 31 December

(in USD million)

2018

2017

2016

 

 

 

 

 

Exploration & Production Norway

 

 

 

Total revenues and other income

22,475

17,692

13,077

Net operating income/(loss)

14,406

10,485

4,451

Non-current segment assets1)

30,762

30,278

27,816

 

 

 

 

 

Exploration & Production International

 

 

 

Total revenues and other income

12,399

9,256

6,657

Net operating income/(loss)

3,802

1,341

(4,352)

Non-current segment assets1)

38,672

36,453

36,181

 

 

 

 

 

Marketing, Midstream & Processing

 

 

 

Total revenues and other income

75,794

59,071

44,979

Net operating income/(loss)

1,906

2,243

623

Non-current segment assets1)

5,148

5,137

4,450

 

 

 

 

 

Other

 

 

 

Total revenues and other income

280

87

39

Net operating income/(loss)

(79)

(239)

(423)

Non-current segment assets1)

353

390

352

 

 

 

 

 

Eliminations2)

 

 

 

Total revenues and other income

(31,355)

(24,919)

(18,880)

Net operating income/(loss)

103

(59)

(219)

Non-current segment assets1)

-

-

-

 

 

 

 

 

Equinor group

 

 

 

Total revenues and other income

79,593

61,187

45,873

Net operating income/(loss)

20,137

13,771

80

Non-current segment assets1)

74,934

72,258

68,799

 

 

 

 

 

1)

Equity accounted investments, deferred tax assets, pension assets and non-current financial assets are not allocated to segments.

2)

Includes elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products.

Inter-segment revenues are based upon estimated market prices.

 

 

 

Equinor, Annual Report on Form 20-F 2018    23 


 

The following tables show total revenues and other income by country.

 

2018 Total revenues and other income by country

Crude oil

Natural gas

Natural gas liquids

Refined

products

Other

Total sales

(in USD million)

 

 

 

 

 

 

 

Norway

30,221

12,441

5,969

8,299

1,483

58,412

US

9,113

1,575

1,198

1,790

444

14,120

Denmark

0

0

0

2,533

22

2,556

United Kingdom

653

0

0

0

124

777

Other

962

543

0

502

1,430

3,436

 

 

 

 

 

 

 

Total revenues and other income1)

40,948

14,559

7,167

13,124

3,503

79,301

 

 

 

 

 

 

 

 

2017 Total revenues and other income by country

Crude oil

Natural gas

Natural gas liquids

Refined

products

Other

Total sales

(in USD million)

 

 

 

 

 

 

 

Norway

23,087

9,741

4,948

6,463

1,026

45,264

US

5,726

1,237

668

1,497

1,237

10,365

Sweden

0

0

0

1,268

10

1,277

Denmark

0

0

0

2,195

12

2,208

Other

706

442

31

0

705

1,884

 

 

 

 

 

 

 

Total revenues and other income1)

29,519

11,420

5,647

11,423

2,990

60,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016 Total revenues and other income by country

Crude oil

Natural gas

Natural gas liquids

Refined

products

Other

Total sales

(in USD million)

 

 

 

 

 

 

 

Norway

20,544

7,973

3,580

4,135

(497)

35,735

US

3,073

957

455

1,110

867

6,463

Sweden

0

0

0

1,379

(53)

1,326

Denmark

0

0

0

1,518

14

1,532

Other

690

272

1

0

(26)

936

 

 

 

 

 

 

 

Total revenues and other income1)

24,307

9,202

4,036

8,142

305

45,993

 

1) Excluding net income (loss) from equity accounted investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

Equinor is a technology-intensive company and research and development is an integral part of our strategy. The technology strategy is about prioritising technology for value creation that enables growth and access, and sets the direction for technology development and implementation for the future. The focus is on low cost, low carbon solutions and re-using standardised technologies.

 

We continuously research, develop and deploy innovative technologies to create opportunities and enhance the value of Equinor’s current and future assets. Equinor’s technology development activities aim to reduce field development, drilling and operating costs, and CO2 and other greenhouse gas emissions. We utilise a range of tools for the development of new technologies:

 

·          In-house research and development

·          Cooperation with academia and research institutes

·          Collaborative development projects with major suppliers

·          Project related development as part of field development activities

·          Direct investment in technology start-up companies through Equinor Technology Invest venture activities

·          Invitation to open innovation challenges as part of Equinor Innovate

 

24   Equinor, Annual Report on Form 20-F 2018     


 

For additional information, see note 7 Other expenses to the Consolidated financial statements.

Equinor, Annual Report on Form 20-F 2018    25 


 

Key figures

 

 

 

 

 

 

 

 

 

 

 

 

(in USD million, unless stated otherwise)

  For the year ended 31 December

2018

2017

2016

2015

2014

 

 

 

 

 

 

 

Financial information

 

 

 

 

 

Total revenues and other income

79,593

61,187

45,873

59,642

99,264

Operating expenses

(9,528)

(8,763)

(9,025)

(10,512)

(11,657)

Net operating income/(loss)

20,137

13,771

80

1,366

17,878

Net income/(loss)

7,538

4,598

(2,902)

(5,169)

3,887

Non-current finance debt

23,264

24,183

27,999

29,965

27,593

Net interest-bearing debt before adjustments

11,130

15,437

18,372

13,852

12,004

Total assets

112,508

111,100

104,530

109,742

132,702

Total equity

42,990

39,885

35,099

40,307

51,282

Net debt to capital employed ratio before adjustments1)

20.6%

27.9%

34.4%

25.6%

19.0%

Net debt to capital employed ratio adjusted1)

22.2%

29.0%

35.6%

26.8%

20.0%

ROACE2)

12.0%

8.2%

(0.4%)

4.1%

8.7%

 

 

 

 

 

 

 

Operational data

 

 

 

 

 

Equity oil and gas production (mboe/day)

2,111

2,080

1,978

1,971

1,927

Proved oil and gas reserves (mmboe)

6,175

5,367

5,013

5,060

5,359

Reserve replacement ratio (annual)

2.13

1.50

0.93

0.55

0.62

Reserve replacement ratio (three-year average)

1.53

1.00

0.70

0.81

0.97

Production cost equity volumes (USD/boe)

5.2

4.8

5.0

5.9

7.6

Average Brent oil price (USD/bbl)

71.1

54.2

43.7

52.4

98.9

 

 

 

 

 

 

 

Share information3)

 

 

 

 

 

Diluted earnings per share (in USD)

2.27

1.40

(0.91)

(1.63)

1.21

Share price at OSE (Norway) on 31 December (in NOK)

183.75

175.20

158.40

123.70

131.20

Share price at NYSE (USA) on 31 December (in USD)

21.17

21.42

18.24

13.96

17.61

Dividend paid per share (in USD)4)

0.91

0.88

0.88

0.90

1.73

Weighted average number of ordinary shares outstanding (in millions)

3,326

3,268

3,195

3,179

3,180

 

 

 

 

 

 

 

1)

See section 5.2 Use and reconciliation of non-GAAP financial measures for net debt to capital employed ratio.

2)

See section 5.2 Use and reconciliation of non-GAAP financial measures for return on average capital employee (ROACE).

3)

See section 5.1 Shareholder information for a description of how dividends are determined and information on share repurchases.

4)

Dividends for the third and fourth quarter 2017 and the first and second quarter 2018 were paid in 2018. Dividend paid in 2014 includes yearly dividend related to 2013 and two quarterly dividends related to 2014 due to change from yearly to quarterly dividend. From and including the third quarter of 2015, dividends were declared in USD. Dividends in previous periods were declared in NOK. Figures for 2015 and earlier periods are presented using the Central Bank of Norway year end rates for NOK.

26   Equinor, Annual Report on Form 20-F 2018     


 

2.3

Exploration & Production Norway
(E&P Norway)

 

  

Overview

 

The Exploration & Production Norway segment covers exploration, field development and operations on the NCS, which includes the North Sea, the Norwegian Sea and the Barents Sea. E&P Norway aims to ensure safe and efficient operations, maximising the value potential from the NCS.

 

For 2018, Equinor reports production on the NCS from 40 Equinor-operated fields, 10 partner-operated fields, as well as equity-accounted production from Lundin Petroleum AB.

 

Key events and portfolio developments in 2018 and early 2019:

·    Equinor was on 16 January 2018 awarded 31  licences (17 as operator) on the NCS in the Awards for predefined areas round 2017  for mature areas

·    Equinor acquired Total’s equity share of the Martin Linge oil and gas field development, effective as of 1 January, and assumed operatorship on 19 March

·    A subsea development of the Askeladd gas /condensate discovery near the Snøhvit field in the Barents Sea was sanctioned on 7 March

·    Two newbuild category J jack-up rigs were brought in operation: Askepott  started drilling on 25 February, spudding the first well at the new field Oseberg Vestflanken 2. The second rig, Askeladden, started operations at Gullfaks on 26 March. These newbuilds increase the safety and efficiency of drilling operations

·    In the 24th concession round for frontier areas Equinor was on 18 June awarded seven licences (five as operator) in the Norwegian Sea and the Barents Sea

·    The Ministry of Petroleum and Energy approved the Plan for development and operation of the Johan Castberg oil field in the Barents Sea on 28 June

·    The Ministry of Petroleum and Energy on 5 July approved the plan for development and operation of Snorre Expansion, expected to increase the oil recovery from the Snorre field and extend field life beyond 2040

·    Visund Nord improved oil recovery came on stream on 2 September. This record fast-track development took 21 months from concept selection until production started and will provide additional oil barrels from Visund, 6% more than originally estimated

·    A new gas treatment module Z at Troll B came on stream on 22 September, expected to boost production at Troll B by 4.7 million barrels of oil

·    The power solution which will provide the Johan Sverdrup field with electric power from Kårstø through an 80 kV submarine cable, was officially opened on 9 October

 

Oseberg Vestflanken 2 achieved first oil on 14 October. The new Oseberg H platform is Norway’s first unmanned platform and will be remotely controlled from the Oseberg field centre

 

Equinor, Annual Report on Form 20-F 2018    27 


 



 

·    Equinor announced on 15 October the sales of its equity share in two gas and condensate discoveries in the Ekofisk area of the NCS. An operated interest in King Lear was sold to Aker BP for USD 250 million, and a non-operated interest in Tommeliten  to PGNiG for USD 220 million. The transactions were completed on 28 December

·    Strengthening the position in the Norwegian Sea, Equinor on 5 December agreed with Faroe Petroleum on several swap transactions with no cash considerations, effective as of 1 January 2019. The transactions increase Equinor’s equity share of the prolific Njord area and reduce its share in non-core assets

·    The Ministry of Petroleum and Energy approved on 7 December the plan for development and operation of Troll phase 3, expected to boost gas recovery from the Troll field and extend field life beyond 2050

·    The power solution which will provide the Martin Linge field with electric power from Kollsnes through the 100 kV alternating current 163-km submarine cable, was connected on 12 December. This is the world’s longest high-voltage alternating current submarine cable

·    The Government issued a white paper to the Norwegian parliament on 14 December, recommending approval of the plan for development and operation of the second phase of the Johan Sverdrup oil and gas field, Norway’s largest industrial project. The plan was submitted to the Ministry of Petroleum and Energy on 27 August

 

First gas from the Aasta Hansteen field in the Norwegian Sea was achieved on 16 December.  At 1,300 metres, the development is the deepest ever on the NCS. The gas is piped from three subsea templates to the floating platform and transported in the Polarled pipeline to the Nyhamna processing plant in Norway for further export through the Langeled pipeline to the UK. The subsea development of the adjacent Snefrid North discovery is underway and will be tied in to the Aasta Hansteen platform

 

28   Equinor, Annual Report on Form 20-F 2018     


 

·    The plan for development and operation of Shetland/Lista phase 2 was submitted to the Ministry of Petroleum and Energy on 15 January 2019. Water injection and new horizontal wells are expected to boost production at Gullfaks  by 17 million barrels of oil

·    Equinor was on 15 January 2019 awarded 29 licences (13 as operator) on the NCS in the Awards for predefined areas round 2018 for mature areas

·    Two new onshore digital support centres, expected to increase value creation, improve safety and lower emissions from Equinor’s installations on the NCS, were officially opened at Sandsli, Bergen, on 7 January 2019. Within a few years, all Equinor-operated fields on the NCS will be supported by onshore operational centres

·    Equinor and its partners made nine commercial discoveries on the NCS in 2018

 

 

 

 

 

 

  



 

Demonstration of the digital twin of the Valemon platform, remotely controlled from Bergen, Norway.

   
 

Equinor, Annual Report on Form 20-F 2018    29 


 

Major producing fields and field developments operated by Equinor and Equinor’s licence partners

 

  

Fields in production on the NCS

The table below shows E&P Norway's average daily entitlement production for the years ending 31 December 2018, 2017 and 2016. Production in 2018 decreased owing to natural decline and higher losses associated with turnarounds.

 

Average daily entitlement production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  For the year ended 31 December

 

2018

 

2017

 

2016

 

Oil and NGL

Natural gas

 

 

Oil and NGL

Natural gas

 

 

Oil and NGL

Natural gas

 

Area production

mbbl/day

mmcm/day

mboe/day

 

mbbl/day

mmcm/day

mboe/day

 

mbbl/day

mmcm/day

mboe/day

 

 

 

 

 

 

 

 

 

 

 

 

Equinor operated fields

 470  

 99  

 1,090  

 

 505  

 100  

 1,136  

 

 511  

 86  

 1,049  

Partner operated fields

 79  

 16  

 181  

 

 70  

 17  

 179  

 

 70  

 17  

 177  

Equity accounted production

 16  

 -    

 16  

 

 19  

 -    

 19  

 

 8  

 -    

 8  

 

 

 

 

 

 

 

 

 

 

 

 

Total

 565  

 115  

 1,288  

 

 594  

 118  

 1,334  

 

 589  

 103  

 1,235  

 

30   Equinor, Annual Report on Form 20-F 2018     


 

The following tables show the NCS entitlement production by fields in which Equinor was participating during the year ended 31 December 2018.

 

Equinor operated fields, average daily entitlement production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographical area

Equinor's equity interest in %

 

On stream 

Licence expiry date

 

Average production in 2018 mboe/day

 

 

Field

 

 

 

 

 

 

 

 

 

Troll Phase 1 (Gas)

The North Sea

30.58

 

1996

2030

 

207

Gullfaks 

The North Sea

51.00

 

1986

2036

 

99

Åsgard 

The Norwegian Sea

34.57

 

1999

2030

7)

85

Oseberg

The North Sea

49.30

 

1988

2031

 

76

Visund 

The North Sea

53.20

 

1999

2034

 

76

Snøhvit

The Barents Sea

36.79

 

2007

2035

 

50

Tyrihans

The Norwegian Sea

58.84

 

2009

2029

 

49

Kvitebjørn

The North Sea

39.55

 

2004

2031

 

47

Grane

The North Sea

36.61

 

2003

2030

 

44

Sleipner Vest

The North Sea

58.35

 

1996

2028

 

38

Troll Phase 2 (Oil)

The North Sea

30.58

 

1995

2030

 

34

Snorre 

The North Sea

33.28

 

1992

2040

1)

31

Statfjord Unit

The North Sea

44.34

 

1979

2026

 

31

Gina Krog

The North Sea

58.70

 

2017

2032

 

30

Gudrun

The North Sea

36.00

 

2014

2028

 

27

Valemon

The North Sea

53.78

 

2015

2031

 

23

Mikkel 

The Norwegian Sea

43.97

 

2003

2024

 

22

Fram 

The North Sea

45.00

 

2003

2024

 

18

Kristin

The Norwegian Sea

55.30

 

2005

2027-2033

2)

17

Alve

The Norwegian Sea

53.00

 

2009

2029

3)

14

Vigdis area 

The North Sea

41.50

 

1997

2040

1)

11

Heidrun 

The Norwegian Sea

13.04

 

1995

2024-2025

 

9

Morvin

The Norwegian Sea

64.00

 

2010

2027

 

9

Urd

The Norwegian Sea

63.95

 

2005

2026

 

7

Tordis area 

The North Sea

41.50

 

1994

2040

1)

7

Sleipner Øst

The North Sea

59.60

 

1993

2028

 

7

Norne

The Norwegian Sea

60.00

 

1997

2036

7)

5

Gungne 

The North Sea

62.00

 

1996

2028

 

4

Byrding

The North Sea

70.00

 

2017

2024-2035

 

3

Sigyn

The North Sea

60.00

 

2002

2022

1)

2

Veslefrikk 

The North Sea

18.00

 

1989

2020-2031

 

2

Statfjord Nord

The North Sea

21.88

 

1995

2026

 

2

Tune

The North Sea

50.00

 

2002

2020-2032

 

1

Statfjord Øst

The North Sea

31.69

 

1994

2026-2040

 

1

Heimdal

The North Sea

29.44

 

1985

2021

 

1

Sygna 

The North Sea

30.71

 

2000

2026-2040

 

1

Aasta Hansteen

The Norwegian Sea

51.00

 

2018

2041

4)

0

Fram H Nord

The North Sea

49.20

 

2014

2024-2035

4)

0

Sindre

The North Sea

52.34

 

2017

2023-2034

4)

0

Gimle 

The North Sea

65.13

 

2006

2023-2034

4)

0

 

 

 

 

 

 

 

 

Total Equinor operated fields

 

 

 

 

1,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equinor, Annual Report on Form 20-F 2018    31 


 

Partner operated fields, average daily entitlement production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographical area

Equinor's equity interest in %

Operator 

On stream 

Licence expiry date

 

Average production in 2018 mboe/day

 

 

Field

 

 

 

 

 

 

 

 

 

Ormen Lange

The Norwegian Sea

25.35

A/S Norske Shell

2007

2040-2041

 

72

Skarv

The Norwegian Sea

36.17

Aker BP ASA

2013

2029-2033

 

37

Ivar Aasen

The North Sea

41.47

Aker BP ASA

2016

2029-2036

 

27

Goliat

The Barents Sea

35.00

Vår Energi AS5)

2016

2042

5)

22

Ekofisk area 

The North Sea

7.60

ConocoPhillips Skandinavia AS

1971

2028

 

13

Marulk

The Norwegian Sea

33.00

Vår Energi AS5)

2012

2025

3)

6

Vilje

The North Sea

0.00

Aker BP ASA

2008

2021

3)

2

Ringhorne Øst

The North Sea

0.00

Vår Energi AS6)

2006

2030

3)

1

Enoch

The North Sea

11.78

Repsol Sinopec North Sea Ltd.

2007

2024

4)

0

Flyndre

The North Sea

0.00

Maersk Oil UK Ltd.

2017

2028

3) 4)

0

 

 

 

 

 

 

 

 

Total partner operated fields

 

 

 

 

181

 

 

 

 

 

 

 

 

Equity accounted production

 

 

 

 

 

 

 

Lundin Petroleum AB

 

20.10

Lundin Petroleum AB

 

 

 

16

 

 

 

 

 

 

 

 

Total E&P Norway including share of equity accounted production

 

 

1,288

 

1)  Licence extended in 2018.

2)   The field has licences with different expiration dates.

3)  A swap of interests was agreed with Faroe Petroleum in 2018, effective 1 January 2019. The transactions are subject to authority approval. The table reflects the new Equinor ownership share, effective 1 January 2019 for the fields Vilje, Ringhorne Øst, Marulk and Alve.

4)   The production is less than 1 mboe/day.

5)   Formerly Eni Norge AS.

6)   Formerly Point Resources AS.

7)   Licence extended in early 2019.

.

 

   

 

  

Main producing fields on the NCS


Equinor-operated fields

Troll (Equinor 30.58%) is the largest gas field on the NCS and a major oil field. The Troll field regions are connected to the Troll A, B and C platforms. Troll gas is produced mainly at Troll A, and oil mainly at Troll B and C. Fram, Fram H Nord and Byrding are tie-ins to Troll C. The third phase of the Troll field is under development.

Gullfaks (Equinor 51%) was developed with three platforms. Since production started on Gullfaks in 1986, several satellite fields have been developed with subsea wells which are remotely controlled from the Gullfaks A and C platforms. Gullfaks Shetland Lista is being developed, with drilling of seven new horizontal wells.

 

The Åsgard  field (Equinor 34.57%) includes the Åsgard A production and storage ship for oil, the Åsgard B semi-submersible floating production platform for gas and condensate, and the Åsgard C storage vessel for oil and condensate. Åsgard C is also storage for oil produced at Kristin and Tyrihans. In 2015 Equinor started the world’s first subsea gas compression train on Åsgard. The Trestakk development will be a tie-in to Åsgard A.

 

The Oseberg  area (Equinor 49.30%) includes the Oseberg field centre, Oseberg C, Oseberg East and Oseberg South production platforms. Oil and gas from the satellites are transported to the Oseberg field centre for processing and transportation. The new Oseberg H unmanned platform came on stream in mid-October.

 

 

32   Equinor, Annual Report on Form 20-F 2018     


 

Partner-operated fields

Ormen Lange (Equinor 25.35%, operated by A/S Norske Shell) is a deepwater gas field in the Norwegian Sea. The well stream is transported to an onshore processing and export plant at Nyhamna. Gassco became operator of Nyhamna from 1 October 2017, with Shell as technical service provider.

 

Skarv (Equinor 36.17%, operated by Aker BP ASA) is an oil and gas field in the Norwegian Sea. The field development includes a floating production, storage and offloading vessel and five subsea multi-well installations.

 

Ivar Aasen (Equinor 41.47%, operated by Aker BP ASA) is an oil and gas field in the North Sea. The development includes a fixed steel jacket with partial processing and living quarters tied in as a satellite to Edvard Grieg for further processing and export.

 

Goliat (Equinor 35%, operated by Vår Energi AS, formerly Eni Norge AS)  is the first oil field developed in the Barents Sea. The field consists of subsea wells tied back to a circular floating production, storage and offloading vessel. The oil is offloaded to shuttle tankers.

 

Ekofisk area (Equinor 7.60%, operated by ConocoPhillips Skandinavia AS) consists of the Ekofisk, Tor, Eldfisk and Embla fields.  

 

Marulk (Equinor 33%, operated by Vår Energi AS, formerly Eni Norge AS) is a gas and condensate field developed as a tie-back to the Norne FPSO.

 

Exploration on the NCS

Equinor holds exploration acreage and actively explores for new resources in all three regions on the NCS, the Norwegian Sea, the North Sea and the Barents Sea.

Equinor was awarded seven licences (five as operator) in the 24th concession round for frontier areas and 29 licences (13 as operator) in the Awards for predefined areas (APA) round 2018 for mature areas and completed several farm-in transactions with other companies.

Throughout 2018, as part of the industry initiative Barents Sea exploration collaboration (BaSEC), Equinor and its partners have continued drilling wells in the Barents Sea and are planning to continue drilling in 2019.

In 2018 Equinor and its partners completed 18 exploratory wells and made nine commercial and three non-commercial discoveries in Norway.

 

Exploratory wells drilled1)

 

 

 

 

 

 

 

 

  For the year ended 31 December

 

2018

2017

2016

 

 

 

 

North Sea

 

 

 

Equinor operated

5

7

9

Partner operated

2

0

2

Norwegian Sea

 

 

 

Equinor operated

4

4

2

Partner operated

4

0

0

Barents Sea

 

 

 

Equinor operated

2

5

0

Partner operated

1

1

1

Total (gross)

18

17

14

 

1) Wells completed during the year, including appraisals of earlier discoveries.

 

Fields under development on the NCS

Equinor’s major development projects on the NCS as of 31 December 2018:

 

Equinor, Annual Report on Form 20-F 2018    33 


 

Johan Sverdrup  (Equinor 40.03%, operator, with additional 4.54% indirect interest held through Lundin)  is an oil and gas discovery in the North Sea. The first phase of the development will consist of 18 producers, 16 water injectors, one observation well and a field centre with four platforms: A living quarter platform, a wellhead platform with permanent drilling facility, a processing platform and a riser and utility platform. Crude oil will be exported to Mongstad through a 283-km designated pipeline, and gas will be exported to the gas processing facility at Kårstø through a 156-km pipeline via a subsea connection to the Statpipe pipeline. The laying of the 36-inch oil pipe and the 18-inch gas pipe was completed in autumn 2018. The power-from-shore solution was officially opened on 9 October 2018. As at the end of 2018, eight production wells and twelve water injection wells have been drilled. First oil is expected in late 2019.

 

The plan for development and operation for the second phase of the Johan Sverdrup field was submitted to the Ministry of Petroleum and Energy on 27 August. The development includes a new processing platform linked to the field centre, five new subsea templates and 28 wells. Around one fourth of the oil from the Johan Sverdrup full field will be produced in the second phase. First oil is expected in late 2022

 

Johan Castberg (Equinor 50%, operator) is the development of the three oil discoveries Skrugard, Havis and Drivis, located some 240 kilometres northwest of Hammerfest in the Barents Sea. The development includes a production vessel and a subsea development with 30 wells, ten subsea templates and two satellite structures. On 28 June 2018, the Norwegian authorities approved the Plan for development and operation of the field. The first steel cut for the topside of the Johan Castberg floating production, storage and offloading unit was made at Kværner’s yard at Stord in November 2018. First oil is expected in late 2022.

 

Martin Linge  (Equinor 70%, operator from 19 March 2018) is an oil and gas field near the British sector of the North Sea. The reservoir is complex with gas under high pressure and high temperatures. Effective as of January 1, 2018, Equinor acquired Total’s interest and assumed the operatorship. The development includes a fixed steel jacket platform with processing and export facilities, with electric power to be supplied from Kollsnes. The two process modules, living quarter and flare modules were successfully installed offshore in July 2018. The power-from-shore solution was energised on 12 December 2018. First oil is expected in 2020.

 

Snorre expansion (Equinor 33.28%, operator) is expected to increase oil recovery from the Snorre field and extend field life beyond 2040. The Ministry of Petroleum and Energy approved the plan for development and operation on 5 July 2018. The concept consists of six subsea templates, with four well slots each. Each slot will have the possibility for either production or injection. 24 wells will be drilled, twelve production wells and twelve injection wells. First oil is expected in 2021.

 

Njord future (Equinor 20%, operator) is a development to enable safe, reliable and efficient exploitation of the Njord and Hyme oil discoveries through to 2040. The development includes an upgrade of the Njord A floating platform, an optimal oil export solution and drilling of ten new wells. As part of the upgrade, the platform will be prepared to bring the nearby fields Bauge and Fenja on stream. The Plan for development and operation was approved on 20 June 2017. First oil is expected in late 2020.

 

Ærfugl (Equinor 36.17%, operated by Aker BP) is the development of the gas and condensate discoveries Ærfugl and Snadd Outer fields in the Norwegian Sea, near the Skarv field, some 200 km west of Sandnessjøen. The field is being developed in two phases and includes six new production wells which will be tied into the Skarv floating production, storage and offloading vessel for processing and storage. The Ministry of Petroleum and Energy approved the plan for development and operation on 6 April 2018. The operator plans for first gas in late 2020.

 

Troll phase 3 (Equinor 30.58%, operator) is expected to increase gas recovery from the Troll field and extend field life beyond 2050. The Ministry of Petroleum and Energy approved the plan for development and operation on 7 December 2018. The subsea development includes two subsea templates, eight production wells, a 36-inch export pipeline and a new process module on the Troll A platform. First gas is expected in 2021.

 

Askeladd (Equinor 36.79%, operator) is the next plateau extender of the Snøhvit gas field in the Barents Sea. The development includes two subsea templates, a 42-km tie-back to Snøhvit and drilling of three gas producers. The project was sanctioned in March 2018. First gas is expected in late 2020.

 

Trestakk  (Equinor 59.1%, operator) is an oil discovery with associated gas on Haltenbanken in the Norwegian Sea. It will be developed as a subsea tie-back to Åsgard A, comprising one subsea template and one satellite with three producers and two injectors. In March 2017, the Plan for development and operation was approved by the Norwegian authorities. During summer 2018, subsea production systems and pipelines were installed at the field. The first well of the Trestakk field development was spudded in November 2018. First oil is expected in 2019.

 

Utgard (Equinor 38.44% interest in the Norwegian and 38% in the UK sector, operator) is a gas and condensate discovery. The development includes two wells in a standard subsea concept, with one drilling target on each side of the UK-Norwegian maritime border in the North Sea. Gas and condensate will be piped through a new 21-km pipeline to the Sleipner field for processing and further transportation to market. In January 2017, the Plan for development and operation and the field development plan were approved by the Norwegian and UK authorities. The first well of the Utgard field development was spudded in September 2018. First gas is expected in second half of 2019.

 

34   Equinor, Annual Report on Form 20-F 2018     


 

 

Decommissioning on the NCS

Under the Petroleum Act, the Norwegian government has imposed strict procedures for removal and disposal of offshore oil and gas installations. The convention for the protection of the marine environment of the Northeast Atlantic (OSPAR) stipulates similar procedures.

 

Volve (Equinor formerly 59.6%, operator) ceased production in September 2016, after more than eight years in production. The permanent plugging of wells was finalised during 2016, and the removal of the subsea facilities was completed in 2018. On 14 June 2018,

 

Equinor and its partners announced the disclosure of all subsurface and operating data from Volve, to foster research, study, development and innovation. This is the most comprehensive NCS data release ever made.

 

Huldra (Equinor 70%, operator) ceased production in September 2014, after 13 years in production. The permanent plugging and abandonment of wells was finalised in 2017, and the platform removal will take place in 2019.

 

Ekofisk (Equinor 7.6%, operated by ConocoPhillips Skandinavia AS): In the third removal campaign, some installations will be removed in 2019.

 

For further information about decommissioning, see note 2 Significant accounting policies to the Consolidated financial statements.

Equinor, Annual Report on Form 20-F 2018    35 


 

2.4

Exploration & Production International

(E&P International)

 

  

 Overview 

Equinor is present in several of the most important oil and gas provinces in the world. The E&P International segment covers development and production of oil and gas outside the Norwegian continental shelf (NCS).

E&P International is present in nearly 30 countries and had production in 12 countries in 2018. E&P International produced 39% of Equinor’s total equity production of oil and gas in 2018, compared to 36% in 2017. For information about proved reserves development see section 2.8 Operational Performance under Proved oil and gas reserves.

 


Bakken in North Dakota, US

 

  

Key events and portfolio developments in 2018 and early 2019:

 

·           On 31 January, Equinor finalised the farm-in transaction for a 50% share in the Deepwater Durban licence in South Africa

·           On 21 March, Equinor was awarded five leases in the  US Gulf of Mexico  

·           On 29 March, Equinor in a consortium comprising other partners was awarded four blocks offshore Brazil in the Campos basin in the 15th licensing round

·           On 29 March, the extension of  In Amenas licence in Algeria from 2022 to 2027 with a restated production sharing agreement (PSA) was formally approved by authorities

·           On 10 April, Equinor completed the acquisition of 40% non-operated interest in the North Platte deep water discovery in the US Gulf of Mexico from Cobalt International Energy, with an effective date of 1 January 2018. Total is the operator

·           On 23 May, Equinor was awarded nine new licences in the 30th offshore licensing round on the  UK continental shelf, eight as operator and one as partner

·           On 30 May, Equinor and Azerbaijan’s state oil company SOCAR signed a risk service agreement related to the appraisal and development of the Karabagh oil field and a PSA for the Ashrafi, Dan Ulduzu, Aypara  area

·           On 5 June, the transactions for Equinor’s sales of equity shares to ExxonMobil and Galp in the BM-S-8 block in the Santos basin, Brazil, were closed. Equinor agreed on 4 July additional equity share transactions with its partners in the BM-S-8 block, pending approval. Equinor will own a 40% operated interest in the neighbouring BM-S-8 and Carcará North blocks following the approval

·           On 7 June, Equinor in a consortium comprising other partners won 28% interest in the Uirapuru block in the Santos basin and 25% in Dois Irmãos  block in the Campos basin in the 4th production sharing bidding round in Brazil. Petrobras is the operator of both blocks

·           On 14 June, Equinor and Petrobras completed their transaction, whereby Equinor acquired a 25% non-operated interest in the Roncador oil field in Brazil’s Campos basin. Petrobras retains operatorship and a 75% interest. The effective date for the Roncador transaction is 1 January 2018

·           On 15 August, Equinor was awarded 16 leases in US Gulf of Mexico

 

36   Equinor, Annual Report on Form 20-F 2018     


 

Equinor acquired 40% interest and assumed operatorship of Rosebank, one of the largest undeveloped fields on the UK continental shelf. The transaction was closed on 10 January 2019.

·           On 7 November, Equinor was awarded three new licences in the Jeanne d’Arc  basin, offshore Newfoundland, two as operator and one as partner

·           On 23 November, Equinor completed the sale of its 17% non-operated interest in the Alba oil field on the UK continental shelf to Verus Petroleum

 

For more information about the transactions see note 4 Acquisitions and divestments to the Consolidated financial statements.

  

International production

Entitlement production volumes are Equinor’s share of the volumes distributed to the partners according to production sharing agreement (PSA) (see section 5.6 Terms and abbreviations). For US assets entitlement production is expressed net of royalty interests. For all other countries royalties paid in-cash are included in entitlement production and royalties payable in-kind are excluded. Equity production represents volumes that correspond to Equinor’s percentage ownership in a particular field and is larger than Equinor’s entitlement production if the field is governed by a PSA.

 

Equinor's equity production outside Norway was 39% of Equinor's total equity production of oil and gas in 2018. Equinor's entitlement production outside Norway was 34% of Equinor's total entitlement production in 2018.

 

The following table shows E&P International's average daily entitlement production of liquids and natural gas for the years ending 31 December 2018, 2017 and 2016.

 

Average daily entitlement production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended 31 December

 

2018

 

2017

 

2016

 

Oil and NGL

Natural gas

 

 

Oil and NGL

Natural gas

 

 

Oil and NGL

Natural gas

 

Production area

mboe/day

mmcm/day

mboe/day

 

mboe/day

mmcm/day

mboe/day

 

mboe/day

mmcm/day

mboe/day

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 245  

 25  

 403  

 

 186  

 19  

 304  

 

 189  

 18  

 299  

Africa

 168  

 6  

 209  

 

 197  

 6  

 233  

 

 203  

 5  

 232  

Eurasia

 21  

 3  

 40  

 

 26  

 3  

 46  

 

 32  

 3  

 50  

Equity accounted production

 0  

 -    

 0  

 

 5  

 -    

 5  

 

 10  

 -    

 10  

Total

 434  

 35  

 652  

 

 415  

 27  

 588  

 

 435  

 25  

 592  



The table below provides information about the fields that contributed to production in 2018. Equity production per field is included in this table.

 

Average daily equity production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Field

Country

Equinor's equity interest in %

Operator 

On stream 

 

Licence expiry date

Average daily equity production in 2018 mboe/day

 

 

 

 

 

 

 

 

 

 

 

Americas

 

 

  

 

 

 

462

Appalachian1) 2)

US

Varies

Equinor/others3)

2008

 

HBP6)

174

Bakken 1)

US

Varies

Equinor/others4)

2011

 

HBP6)

63

Eagle Ford 1)

US

Varies

Equinor/others5)

2010

 

HBP6)

43

Peregrino

Brazil

60.00

Equinor Brasil Energia Ltda.

2011

 

20347)

37

Tahiti

US

25.00

Chevron USA Inc.

2009

 

HBP6)

28

Roncador

Brazil

25.00

Petróleo Brasileiro S.A.

2018

 

2025

28

St. Malo

US

21.50

Chevron USA Inc.

2014

 

HBP6)

23

Caesar Tonga

US

23.55

Anadarko U.S. Offshore LLC

2012

 

HBP6)

16

Julia

US

50.00

ExxonMobil Corporation

2016

 

HBP6)

13

Jack

US

25.00

Chevron USA Inc.

2014

 

HBP6)

9

Hibernia/Hibernia Southern Extension8)

Canada

Varies

Hibernia Management and Development Corporation Ltd.

1997

 

HBP6)

8

Hebron

Canada

9.01

ExxonMobil Canada Properties

2017

 

HBP6)

6

Terra Nova

Canada

15.00

Suncor Energy Inc.

2002

 

HBP6)

5

Stampede

US

25.00

Hess Corporation

2018

 

HBP6)

4

Heidelberg

US

12.00

Anadarko U.S. Offshore LLC

2016

 

HBP6)

4

Titan

US

100.00

Equinor USA E&P Inc.

2018

 

HBP6)

2

Big Foot9)

US

27.50

Chevron USA Inc.

2018

 

HBP6)

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Field

Country

Equinor's equity interest in %

Operator 

On stream 

 

Licence expiry date

Average daily equity production in 2018 mboe/day

 

 

Africa

 

 

  

  

 

  

287

Block 17

Angola

23.33

Total E&P Angola Block 17

2001

 

2022-3410)

124

In Salah

Algeria

31.85

Sonatrach11)

2004

 

2027

46

 

 

 

 

BP Exploration (El Djazair) Limited

 

 

 

 

 

 

 

 

Equinor In Salah AS

 

 

 

 

Agbami

Nigeria

20.21

Star Deep Water Petroleum Limited

(an affiliate of Chevron in Nigeria)

2008

 

2024

43

Block 15

Angola

13.33

Esso Exploration Angola Block 15

2004

 

2026-3210)

31

In Amenas

Algeria

45.90

Sonatrach11)

2006

 

2027

21

 

 

 

 

BP Amoco Exploration (In Amenas) Limited

 

 

 

 

 

 

 

 

Equinor In Amenas AS

 

 

 

 

Block 31

Angola

13.33

BP Exploration Angola

2012

 

2031

15

Murzuq

Libya

10.00

Akakus Oil Operations

2003

 

2035

8

 

 

 

 

 

 

 

 

 

Eurasia

 

 

 

 

 

 

73

ACG

Azerbaijan

7.27

BP Exploration (Caspian Sea)Limited

1997

 

2049

42

Corrib

Ireland

36.50

Vermilion Exploration and Production Ireland Limited

2015

 

2031

19

Kharyaga

Russia

30.00

Zarubezhneft-Production Kharyaga LLC

1999

 

2031

9

Alba12)

UK

17.00

Chevron North Sea Limited

1994

 

HBP6)

2

 

 

 

 

 

 

 

 

 

Total E&P International

 

 

 

823

 

 

 

 

 

 

 

 

 

Equity accounted production

 

 

 

 

 

 

 

North Komsomolskoye 13)

Russia

33.33

LLC SevKomNeftegaz

2018

 

2112

0

 

 

 

 

 

 

 

 

 

Total E&P International including share of equity accounted production

 

 

823

 

 

 

 

 

 

 

 

 

1)

Equinor’s actual equity interest can vary depending on wells and area.

2)

Appalachian basin contains Marcellus and Utica formations.

3)

Operators are Equinor USA Onshore Properties Inc, Chesapeake Operating INC., Southwestern Energy, Alta Resources Development LLC, Chief Oil & Gas LLC and several other operators.

4)

Operators are Equinor Energy LP, Continental Resources INC, Oasis Petroleum North America LLC, Hess Corporation, EOG Resources INC, Whiting Petroleum Corporation and several other operators.

5)

Operators are Equinor Texas Onshore Properties LLC and several other operators.

6)

Held by Production (HBP): A company’s right to own and operate an oil and gas lease beyond its original primary term.

7)

Licence BMC-7 expires in 2034, and licence BMC-47 related to the second phase of the development, expires in 2040

8)

Equinor's equity interests are 5.0% in Hibernia and 9.26% in Hibernia Southern Extension.

9)

Production started in November 2018. Equinor share of average daily equity production is only 0.30 mboe/day in 2018.

10)

Licence expiry varies by field.

11)

The complete name for Sonatrach is Société Nationale de transport et de commercialisation d’hydrocarbures.

12)

On 23 November, Equinor completed the sale of its share in Alba to Verus Petroleum.

13)

Test production started in December 2018. Equinor share of average daily equity production is only 0.02 mboe/day in 2018.

Equinor, Annual Report on Form 20-F 2018    37 


 

 

38   Equinor, Annual Report on Form 20-F 2018     


 

Americas

US – Offshore Gulf of Mexico

The Titan oil field is Equinor-operated asset located in the Mississippi Canyon and is producing through a floating spar facility. Equinor acquired the Titan and the gas and oil export lines in November 2017 following the bankruptcy of Bennu Oil & Gas. During 2018, Equinor reinstated production from three wells.

 

The Tahiti, Caesar Tonga, Stampede and Heidelberg oil fields are partner operated assets located in the Green Canyon area. Tahiti oil field is producing through a floating spar facility. In 2018, Tahiti vertical expansion, the field’s next development phase, commenced production through four shallower production wells including subsea infrastructure. The Caesar Tonga oil field is tied back to the Anadarko-operated Constitution spar host. The Stampede oil field is producing through a tension-leg platform with downhole gas lift. Stampede commenced production in February 2018 and is expected to ramp up in 2019. The Heidelberg oil field is producing through a floating spar facility.

 

The Jack, St. Malo, Julia and Big Foot oil fields are partner operated assets located in the Walker Ridge area. The Jack, St. Malo and Julia oil fields are subsea tie-backs to the Chevron-operated Walk Ridge regional host facility. The Big Foot oil field is producing through a dry tree tension-leg platform with a drilling rig. Big Foot commenced production in November 2018 and a total of seven production wells are planned for the project.

 

US – Onshore

Since the entry in US shale in 2008, Equinor has continued to grow and optimise its portfolio through acreage acquisition and divestments. In September 2018, Equinor successfully acquired 100% ownership interest in 60,000 net acres in the prolific Austin Chalk basin in Louisiana.

 

The US onshore operations are the largest international contributor to Equinor production.

Equinor has an ownership interest in the Marcellus shale gas play, located in the Appalachian region in north east US. The position is mostly partner operated through Chesapeake Energy Corporation in Pennsylvania and Southwestern Energy in West Virginia and southern Pennsylvania. The total partner operated net acreage position at the end of 2018 was around 220,000 net acres. In 2012, Equinor also became an operator in the Appalachian region in the state of Ohio. Within the operated acreage, Equinor is developing two formations: Marcellus and Utica. Equinor’s operated net acreage position in Appalachian is around 27,000 net acres.

 

Equinor has an ownership interest in the Eagle Ford shale formation located in south west Texas through a joint venture with Repsol. Through transactions in 2013 and 2015, Equinor obtained full operatorship in the joint venture and increased its working interest to 63%. Equinor's net acreage position in Eagle Ford at the end of 2018 was around 71,000 net acres.

 

Equinor has an ownership interest in the Bakken tight oil play through the acquisition of Brigham Exploration Company. Equinor’s net acreage position in Bakken and Three Forks shale formations at the end of 2018 was around 236,000 net acres. The majority of Equinor’s acreage position in the Bakken shale is operated by Equinor with an average working interest of approximately 70%.

 

In addition to the operated oil and gas producing assets, Equinor participates in gathering and facilities for initial processing of oil and gas in the Bakken, Eagle Ford and Appalachian basin assets in the US. This includes crude and natural gas gathering systems, fresh water supply systems, salt water gathering and disposal wells, oil and gas treatment and processing facilities to provide flow assurance for Equinor’s upstream production.

 

Brazil

The Peregrino field is an Equinor-operated heavy oil asset, located in the offshore Campos basin. The oil is produced from two wellhead platforms with drilling capability, processed on the FPSO Peregrino and offloaded to shuttle tankers.

 

With the Peregrino field, Equinor is the largest international operator in Brazil.

Equinor, Annual Report on Form 20-F 2018    39 


 

 

Peregrino well head platform B, Brazil

 

 

Production from Peregrino started in 2011. In the second phase of the Peregrino field development, a third wellhead platform is being constructed, expected to significantly extend the field life.

 

The Roncador field is operated by Petrobras, located in the offshore Campos basin. The field has been in production since 1999. The hydrocarbon is produced from two semi-submersibles and two FPSOs. The oil is offloaded to shuttle tankers, and the gas is drained out through pipelines to shore.

 

Canada    

Equinor has interests in the Jeanne d'Arc basin offshore the province of Newfoundland and Labrador in the partner operated producing oil fields Terra Nova, Hebron, Hibernia and Hibernia Southern Extension.

 

The Hebron field started production in November 2017. The Hebron field consists of a fixed gravity base structure with drilling capabilities and storage for oil. Oil is offloaded to shuttle tankers.

 

 

Marcellus, US

 

40   Equinor, Annual Report on Form 20-F 2018     


 

  

 

Africa

Angola

The deep-water blocks 17, 15 and 31 contributed with 30% of Equinor’s equity liquid production outside Norway in 2018. Each block is governed by a PSA which sets out the rights and obligations of the participants, including mechanisms for sharing of the production with the Angolan state oil company Sonangol.

 

Block 17 has production from four FPSOs; CLOV, Dalia, Girassol and Pazflor. During 2018, CLOV phase II, Dalia phase III and Zinia phase II were all sanctioned, by the partnership,  pending approval for CLOV phase II and Dalia phase III from the concessioner. These projects will add reserves and new production to help stem decline.

 

Block 15 has production from four FPSOs: Kizomba A, Kizomba B, Kizomba C-Mondo, and Kizomba C-Saxi Batuque. In 2018, new wells were added and set into production

 

Block 31 has production from one FPSO producing from the PSVM fields. The FPSOs serve as production hubs and each receives oil from more than one field through multiple number of wells.

Nigeria

Equinor has a 20.2% interest in the Agbami deep water field, which is located 110 km off the coast of the Central Niger Delta region. The field is developed with subsea wells connected to an FPSO. The Agbami field straddles the two licences OML 127 and OML 128 and is operated by Chevron under a Unit Agreement. Equinor has 53.85% interest in OML 128.

For information related to the Agbami  redetermination process and the dispute between the Nigerian National Petroleum Corporation and the partners in Oil Mining Lease (OML) 128 concerning certain terms of the OML 128 production sharing sontract (PSC), see note 24 Other commitments, contingent liabilities and contingent assets to the Consolidated financial statements.

 

Algeria

The In Salah onshore gas development is a joint operatorship between Sonatrach, BP and Equinor. The Northern fields have been operating since 2004. The Southern fields project, which was led by Equinor, started production from two fields in 2016 and from another two fields in 2017. The Southern fields are tied back into the Northern fields existing facilities.

  

The In Amenas onshore development is a gas development which contains significant liquid volumes. The In Amenas infrastructure includes a gas processing plant with three trains. The production facility is connected to the Sonatrach distribution system. The facilities are operated through a joint operatorship between Sonatrach, BP and Equinor. The In Amenas gas compression project, which was led by BP, came into operation in February 2017. The compressors have made it possible to increase production and thereby utilise the capacity of all three trains. In 2017, Equinor and the rest of the In Amenas partners secured a licence extension of 5 years beyond 2022.

 

Separate PSAs including mechanisms for revenue sharing, govern the rights and obligations of the Parties and establish joint operatorships between Sonatrach, BP and Equinor for In Salah and In Amenas.

 

Eurasia

Production consists mainly of the output from the Azeri-Chirag-Gunashli (ACG) oil field offshore Azerbaijan, the Corrib  gas field off Ireland’s northwest coast, and the Kharyaga  oil field onshore in the Timan-Pechora basin in northwestern Russia.

 

Azerbaijan

The ACG licence was extended in 2017 until the end of 2049 through an amended and restated PSA. Equinor’s interest was adjusted from 8.56% to 7.27% due to ratified licence extension. The ACG new platform project is an additional production platform in the ACG contract area and work is ongoing to optimise the chosen concept.   

 

International exploration

Equinor has increased exploration activity outside Norway compared with 2017, and drilled offshore wells in the US GoM, Tanzania and Brazil. Onshore exploration activity is ongoing in Argentina, Turkey and Russia. Continued focus on access has strengthened the exploration portfolio further.

 

Brazil is one of Equinor’s core exploration areas. In 2018 Equinor and partners were the highest bidders for four blocks in the Campos basin in Brazil’s 15th licensing round. Through the fourth pre-salt offshore licensing round Equinor and its partners also further strengthened its position with the Dois Irmãos block adjacent to the blocks awarded in the 15th licensing round and with the Uirapuru block in the Carcará area in the Santos Basin. With the new licences, Equinor reinforces its ambition of long-term growth in Brazil and increases synergies with current projects.   

Equinor, Annual Report on Form 20-F 2018    41 


 

 

Equinor and the Azerbaijan’s state oil company SOCAR signed a Risk service agreement related to the appraisal and development of the Karabagh oil field and a production sharing agreement (PSA) for the Aypara area. The agreement will strengthen our position in a prolific basin and develop growth options.  

 

Equinor was awarded 21 leases in US Gulf of Mexico in 2018 and is strengthening its position in the area.

In the 30th Offshore licensing round on the
UK continental shelf Equinor was awarded nine licences, eight as operator and one as partner. These awards strengthen our position in UK exploration.

 

Equinor and its partners were the successful bidders for three exploration parcels in the prolific Jeanne d’Arc basin, offshore Newfoundland in Canada. Equinor will be operator for two of the parcels. The successful bids align with Equinor’s strategy of developing our position in prolific basins.


Equinor and its partners completed six exploratory wells and made one non-commercial discovery internationally. The Guanxuma well in Brazil is under evaluation.

 

Exploratory wells drilled1)

 

 

 

 

 

 

 

 

  For the year ended 31 December

2018

2017

2016

 

 

 

 

Americas

 

 

 

Equinor operated

1

2

5

Partner operated

4

4

2

Africa

 

 

 

Equinor operated

1

0

0

Partner operated

0

0

0

Other regions

 

 

 

Equinor operated

0

4

0

Partner operated

0

1

2

Total (gross)

6

11

9

 

 

 

 

1) Wells completed during the year, including appraisals of earlier discoveries.

Fields under development internationally

Americas

US – Offshore Gulf of Mexico

Vito development project (Equinor 36.89%, operated by Shell) is located  in the Mississippi Canyon area. The development project consists of a light-weight semi-submersible platform with a single eight-well subsea manifold. The wells will have an approximate depth of 10,000 meters and will have downhole gas lift to assist production. The project was sanctioned for development in April 2018. Production is expected to start in first half of 2021.

Brazil

Peregrino Phase II (Equinor 60%, operator) develops the southwestern area of the Peregrino oil field in the Campos basin, 85 km off the coast of the state of Rio de Janeiro.

 

42   Equinor, Annual Report on Form 20-F 2018     


 

Peregrino phase 1 was brought on stream in 2011, and the second phase of the development will prolong the field’s productive life. The licence period extends until 2040. Fifteen oil producers and seven water injectors will be drilled in the new area from a third wellhead platform, to be tied back to the existing floating production, storage and offloading vessel. The construction of the third Peregrino wellhead platform is well underway. Production is expected to start in late 2020.

Eurasia
United Kingdom

Mariner (Equinor 65.11%, operator) is a heavy oil development in the North Sea, some 150 km east of Shetland, UK. The field development includes a production, drilling and living quarter platform based on a steel jacket. Oil will be exported by offshore loading from a floating storage unit. The development includes a possible future subsea tie-in of Mariner East, a small heavy oil discovery. Offshore hook-up and commissioning is currently ongoing. Production is expected to start in 2019.



Discoveries with potential development

Americas

US – Offshore Gulf of Mexico
In April 2018, Equinor completed the acquisition of 40% interest in the
North Platte discovery from Cobalt International Energy, with an effective date of 1 January 2018. North Platte is a paleogene oil discovery in the Garden Banks area. It has been fully appraised since its discovery with three drilled wells and three sidetracks.

 

 

Brazil

Carcará (Equinor 40%, operator) oil and gas discovery straddles BM-S-8  and Carcará North in the Santos basin, some 200 km off the coast of the state of São Paulo in Brazil.

 

A phased development of Carcará is being considered, with an initial development of the appraised southern part. Upon completion of the Carcará North appraisal programme, a full-field development will be progressed to fully exploit the value potential.

 

BM-C-33 (Equinor 35%, operator) includes the oil and gas discoveries Pão de Açúcar, Gávea and  Seat in the southwestern part of the Campos basin, off the coast of the state of Rio de Janeiro, Brazil. An FPSO development of Pão with partial gas injection and rich gas export is being assessed. The project is currently in the early phase, maturing towards concept selection. The adjacent Dois Irmãos block will be explored by Equinor and its partners.

Canada

Bay du Nord (Equinor 65%, operator) oil field in the Flemish pass basin, some 500 km northeast of St. John’s in Newfoundland and Labrador, Canada, was discovered by Equinor in 2013. A framework agreement with the provincial government of Newfoundland and Labrador was entered into in July 2018. A tie-in of the adjacent Baccalieu  discovery is being considered. Drawing upon the experience from the Johan Castberg development in Norway, Equinor is considering developing the Bay du Nord field using an FPSO solution. Concept studies have begun, and sanction is expected in the early 2020s.

 

  

 

Africa

Tanzania

Block 2 (Equinor 65%, operator): Equinor made several large gas discoveries in Block 2 in the Indian Ocean, off southern Tanzania, during 2012-2015. Options for developing the discoveries with an onshore LNG solution are being assessed. Equinor’s Block 2 exploration licence in Tanzania was formally due to expire in June 2018, but based on communication with the applicable Tanzanian authorities, the block continues to be in operation while the process related to the grant of a new exploration licence for the block is ongoing. See also note 11 Intangible assets to the Consolidated financial statements.

  

 

Equinor, Annual Report on Form 20-F 2018    43 


 

Eurasia
United Kingdom
Rosebank (Equinor 40%, operator): The Rosebank oil and gas field some 130 km northwest of Shetland is one of the largest undeveloped fields on the UK continental shelf. In October, Equinor entered into an agreement to acquire Chevron’s 40% interest and assume operatorship in Rosebank. The transaction was completed in January 2019. Equinor will use its experience to improve the business case together with the licence partners and is in dialogue with the authorities on achieving a licence extension.

Russia

North Komsomolskoye (Equinor 33.33%, operated by SevKomNeftegaz) is a complex viscous oil field in Western Siberia, Russia. In 2017, Equinor and Rosneft entered into a shareholders’ and operating agreement for the North Komsomolskoye field. In 2018, Equinor Russia AS acquired 33.33% of the shares in the JV company LLC SevKomNeftegaz, and the deal was closed on 21 December 2018. The joint venture started test production from the field in 2018 to improve reservoir understanding and lay the ground for a potential full field development decision.

 

For information about risks related to activity in Russia see section 2.11 Risk review under Risks related to our business  

 

44   Equinor, Annual Report on Form 20-F 2018     


 

2.5

Marketing, Midstream & Processing (MMP)

 

  

Overview

The Marketing, Midstream & Processing reporting segment is responsible for the marketing, trading, processing and transportation of crude oil and condensate, natural gas, NGL and refined products, including the operation of the Equinor-operated refineries, terminals and processing plants. In addition, MMP is responsible for power and emissions trading and for developing transportation solutions for natural gas, liquids and crude oil from Equinor assets, including pipelines, shipping, trucking and rail. The business activities within MMP are organised in the following business clusters: Marketing and Trading, Asset Management and Processing and Manufacturing.

 

MMP markets, trades and transports approximately 50% of all Norwegian liquids export, including Equinor equity, the Norwegian State's direct financial interest (SDFI) equity production of crude oil and NGL, and third-party volumes. MMP is also responsible for the marketing, trading and transportation of Equinor’s and SDFI’s gas together with third-party gas. This represents approximately 70% of all Norwegian gas exports. For more information, see note 2 Significant accounting policies to the Consolidated financial statement for Transactions with the Norwegian State, and the Norwegian State’s participation and SDFI oil and gas marketing and sale in Applicable laws and regulations in section 2.7 Corporate.

 

 

Melkøya in Hammerfest, Norway

 

  

Key events in 2018 and early 2019:

·          A long-term contract was awarded on 26  September to Knutsen NYK Offshore for two new built shuttle tankers for lifting of the Equinor equity crude production from the Roncador field in Brazil.

·           The divestment of the 27.3% ownership in Norsea Petroleum Ltd, the owner of the Teesside Terminal in the UK, became effective on 20  July.

·           An agreement for terminal and storage for LPG in Port Klang Malaysia with Global Petro Storage was signed on 30  October.

 

 

Equinor expands in energy trading through the acquisition of Danske Commodities, effective on 31 January 2019.

Marketing and trading of gas and LNG

Equinor’s gas marketing and trading business is conducted from Norway and from the offices in Belgium, the UK, Germany, the US and Singapore.

 

Europe

The major export markets for gas from the Norwegian continental shelf (NCS) are Germany, France, the UK, Belgium, the Netherlands, Italy and Spain. LNG from the Snøhvit field, combined with third-party LNG cargoes, allow Equinor to reach the global gas markets. The gas is sold to counterparties through bilateral sales agreements and over the trading desks through all the main

Equinor, Annual Report on Form 20-F 2018    45 


 

European trading hubs. The bilateral sales are mainly carried out with large industrial customers, power producers and local distribution companies. A few of Equinor’s long-term gas contracts contain contractual price review mechanisms that can be triggered by the buyer or seller as regulated by the contracts. For the ongoing price reviews, Equinor provides in its financial statements for probable liabilities based on Equinor’s best judgement. For further information, see note 24 Other commitments, contingent liabilities and contingent assets to the Consolidated financial statements.

 

Equinor is active on both the physical and exchange markets such as the Intercontinental Exchange (ICE). Equinor expects to continue to optimise the market value of the gas volumes through a mix of bilateral contracts and trading via its production and transportation systems and downstream assets.    

 

US 

Equinor Natural Gas LLC (ENG), a wholly-owned subsidiary, has a gas marketing and trading organisation in Stamford, Connecticut that markets natural gas to local distribution companies, industrial customers and power generators. ENG also markets equity production volumes from the Gulf of Mexico, Eagle Ford and the Appalachian Basin and transports some of the Appalachian production to New York City and to Niagara, providing access to the greater Toronto area.

 

In addition, ENG has long-term capacity contracts at the Cove Point LNG re-gasification terminal, that enables sourcing of LNG from the Snøhvit LNG facility in Norway. Due to the low gas prices in the US compared to the global LNG prices over the last years, all of Equinor's LNG cargoes have been diverted away from the US and delivered into the higher priced markets in Europe, South-America and Asia.

 

Marketing and trading of liquids

MMP is responsible for the sale of Equinor's and SDFI’s crude oil and NGL, in addition to the commercial optimisation of the refineries and terminals. The liquids marketing and trading business is conducted from Norway, the UK, Singapore, the US and Canada. The main crude oil market for Equinor is Northwest Europe.

 

MMP also markets the equity volumes from the E&P International assets located in the US, Brazil, Angola, Nigeria, Algeria, Azerbaijan and the UK, as well as third-party volumes. The value is maximised through marketing, physical and financial trading and through the optimisation of the own and leased capacity such as refineries, processing, terminals, storages, pipelines, railcars and vessels.

 

Manufacturing

Equinor owns and operates the Mongstad refinery in Norway, including the Mongstad heat and power plant (MHPP). The refinery is a medium-sized refinery built in 1975, with a crude oil and condensate distillation capacity of 226,000 barrels per day. The refinery is directly linked to the offshore fields through two crude oil pipelines, to the crude oil terminal at Sture and the gas processing plant at Kollsnes through an NGL/condensate pipeline, and to Kollsnes by a gas pipeline. MHPP produces heat and power from gas received from Kollsnes and from the refinery. It has capacity of generating approximately 280 megawatts of electric power and 350 megawatts of process heat. Following the termination of the existing gas agreement between the Troll licence and Equinor Refining Norway AS, Equinor has decided to redesign a part of the heat and power plant to a heater plant which is planned to be operational in 2020. When operational the heater plant will run on refinery gas and provide heat and steam to the refinery. A new gas arrangement with the Troll partners has been agreed to continue the operation of the MHPP until the heater plant is in operation.

 

Equinor has an ownership interest in Vestprosess (34%), which transports and processes NGL and condensate. The Vestprosess pipeline connects the Kollsnes and Sture plants to Mongstad. The operatorship of Vestprosess was transferred to Gassco as of 1 January 2018, with Equinor as the technical service provider.

 

Equinor owns and is the operator of the Kalundborg refinery in Denmark, which has a crude oil and condensate distillation capacity of 108,000 barrels per day. The refinery is connected via one gasoline and one gas oil pipeline to the terminal at Hedehusene near Copenhagen, and most of its products are sold locally.

 

Equinor has an ownership interest in the methanol plant (82.0%) at Tjeldbergodden. The plant receives natural gas from the Norwegian Sea through the Haltenpipe pipeline. In addition, Equinor holds an ownership interest in the air separation unit Tjeldbergodden Luftgassfabrikk DA (50.9%).

 

The following table shows the operating statistics for the plants at Mongstad, Kalundborg and Tjeldbergodden. The lower throughput and the on-stream factor in 2018 were mainly influenced by higher unplanned shut downs for Mongstad, Kalundborg and Tjeldbergodden compared to 2017. In addition, Kalundborg had two planned shutdowns and Tjeldbergodden one planned shutdown in 2018. In 2016 both Mongstad and Tjeldbergodden had planned shutdowns.

  

 

 

Throughput1)

Distillation capacity2)

On stream factor %3)

Utilisation rate %4)

Refinery

2018

2017

2016

2018

2017

2016

2018

2017

2016

2018

2017

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mongstad

11.5

12.0

9.4

9.3

9.3

9.3

95.3

97.5

94.4

93.8

94.7

93.9

Kalundborg

5.3

5.5

5.0

5.4

5.4

5.4

94.1

99.7

98.0

90.3

90.4

91.0

Tjeldbergodden

0.8

0.9